GIFT  OF 

11>U    GEORGE   R.    HaRRIEJ 


GEO.  H.  HARRIES 


PUBLIC  OWNERSHIP  AND  THE 
TELEPHONE  IN  GREAT  BRITAIN 


•T^^^^ 


PUBLIC  OWNERSHIP  AND 

THE  TELEPHONE  IN 

GREAT  BRITAIN 


RESTRICTION  OF  THE  INDUSTRY  BY  THE  STATE 
AND  THE  MUNICIPALITIES 


BY 

HUGO  RICHARD  MEYER 

SOMETIME    ASSISTANT   PROFESSOR   OF   POLITICAL   ECONOMY   IN   THE 

UNIVERSITY     OF   CHICAGO,     AUTHOR     OF     "GOVERNMENT 

REGULATION  OF  RAILWAY  RATES,"    "MUNICIPAL 

OWNERSHIP   IN   GREAT   BRITAIN,"  "tHE 

BRITISH  STATE  TELEGRAPHS" 


THE  MACMILLAN  COMPANY 

LONDON:  MACMILLAN  &  CO.,  Ltd, 
1907 

All  rights  reteryr.J_ 


COPVBICHT,  1907 

By  THE  MACMILLAN  COMPANY 


Set  up  and  electrotyped.    Published  October  1907 


THB  MASON-HENKY  PKBB3 
8YKACUSE.  NEW  YORK 


^ 


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o 


HE. 


TO  MY  WIFE 


CONTENTS 

CHAPTER  I 

Page 
Introduction 3 

Scope  of  the  Inquiry. 

CHAPTER  II 

The  Telephone  Licenses  of  i88i  and  1884  ...  8 
The  Government  declines  to  buy  the  telephone  patents. 
Mr.  Justi.e  Stephen  holds  that  the  telephone  is  an  in- 
fringement of  the  Postmaster  General's  telegraph  monop- 
oly. Ihe  Government  waives  the  Postmaster  General's 
monopoly  rights,  upon  terms  designed  to  restrict  the  de- 
velopment of  t\f  telephone  business.  The  Postmaster 
General  by  means  of  an  administrative  ruling  infringes 
the  statutory  rights  of  the  owners  of  the  telephone 
patents.  Public  opinion  compels  the  Government  to 
relax  somewhat  its  restrictive  measures.  The  Govern- 
ment, in  effect,  refuses  to  permit  the  Post  Office  to 
engage  in  the  telephone  business.  The  refusal  is 
prompted  in  part  by  the  unsatisfactory  working  of  the 
experiment    of   State    telegraphs,    inaugurated    in    1868. 

CHAPTER  III 

The    Amalgamations    of    1889-90 3° 

The  United  Telephone  Company,  owner  of  the  master 
patents,  establishes  subsidiary  companies  for  the  several 
parts  of  the  United  Kingdom.  Those  companies  subse- 
quently are  consolidated  into  the  National  Telephone 
Company.  The  consolidation  results  in  the  issue  of 
$iS;S2S,ooo  of  securities,  which  represent  a  cash  outlay 
of  $9,065,000.  The  injection  of  $6,460,000  of  "water"  is 
vii 


viii  CONTENTS 

not  a  stock  market  operation,  so-called,  but  a  necessary 
incident  in  the  upbuilding  of  a  new  industry.  At  the 
time  of  the  consolidation  the  profits  yielded  by  the  tele- 
phone business  were  high;  but  since  then  they  have 
averaged  about  eight  per  cent,  upon  the  capital  actually 
invested.  The  "water"  injected  in  1889  to  1890  is  elim- 
inated by  1903,  through  the  practice  of  expending  upon 
plant  undistributed  net  earnings. 

CHAPTER  IV 

The  Compulsory  Sale  of  the  National  Telephone  Com- 

PANv's  Long  Distance  Service 39 

The  growth  of  the  National  Telephone  Company  in 
the  years  1885  to  1892,  in  spite  of  the  lack  of  power  to 
use  the  streets,  thoroughly  alarmed  the  Government,  lest 
the  telephone  should  largely  replace  the  telegraph  for 
the  purpose  of  intra-city  as  we]l  as  inter-city  communi- 
cation. The  Post  Office  Telegraphs  were  in  no  position 
to  meet  the  competition  of  the  telephone,  because  of  the 
mismanagement  brought  about  by  the  intervention  of 
the  House  of  Commons.  On  the  other  hand,  the  public 
demand  for  a  better  as  well  as  a  more  extensive  tele- 
phone service,  made  it  impossible  for  the  Government 
to  continue  to  deny  the  National  Telephone  Company 
way-leaves.  Under  the  circumstances  the  Government 
resolved  to  give  the  National  Telephone  Company 
moderate  way-leaves ;  and  to  protect  the  Treasury's 
interest  in  the  State  Telegraphs  by  compelling  the 
National  Telephone  Company  to  sell  its  long-distance 
telephone  plant  and  withdraw  from  the  business  of  pro- 
viding inter-city  communication.  The  National  Tele- 
phone Company  under  compulsion  acceded  to  the  Gov- 
ernment's proposal.  Dr.  Cameron,  M.  P.,  Glasgow, 
moved  that  the  Government  purchase  the  entire  busi- 
ness of  the  National  Telephone  Company,  local  as  well 
as  long-distance;  but  the  House  of  Commons  rejected 
the  motion,  after  the  Government  had  protested  that 
the  increase  in  the  State  employees  involved  in  Dr. 
Cameron's  proposal  would  constitute  a  grave  political 
danger. 


CONTENTS  ix 

CHAPTER  V 

The  Post  Office   Fails  to   Provide  an   Adequate  Long- 
distance Service 63 

The  fear  of  "log-rolling"  induces  the  Government  to 
adopt  the  policy  of  making  no  extensions  of  the  long- 
distance telephone  service,  unless  no  financial  risk  is  in- 
volved, or,  the  districts  to  be  served  shall  guarantee  "a 
specific  revenue  per  year,  fixed  with  reference  to  the 
estimated  cost  of  working  and  maintaining  a  given 
mileage  of  trunk  line  wire."  Evidence  in  detail  that 
the  Government  has  failed  to  provide  adequate  long- 
distance telephone  facilities.  Thus  far  no  Government 
elected  directly  or  indirectly  by  universal  manhood  suf- 
frage has  been  able  to  husband  its  resources  so  as  to 
be  able  properly  to  finance  such  industrial  ventures  as 
it  may  have  undertaken.  In  that  respect  the  experience 
of  Great  Britain  has  been  a  repetition  of  the  experience 
of  France,  Italy,  Australia  and   Prussia. 

CHAPTER  VI 

The   Refusal  of  Way-Leaves 74 

The  telephone  licenses  of  1881  and  1884  merely  waived 
the  Postmaster  General's  monopoly  rights;  they  con- 
ferred no  power  to  erect  poles  in  the  streets,  or  to  lay 
wires  underground ;  so  that,  in  cities  and  towns,  the 
telephone  wires  had  to  be  strung  from  house-top  to 
house-top.  As  late  as  1898,  no  less  than  120,000  miles 
of  wire,  out  of  a  total  of  143,000  miles  of  wire  were  so 
strung.  The  system  of  house-top  wires  rendered  it  im- 
possible to  provide  a  telephone  service  satisfactory  in 
quality  or  adequate  in  extent ;  and  it  delayed  for  years 
the  replacement  of  the  earth-return  circuit  by  the  metal- 
lic circuit.  The  National  Telephone  Company  in  1884. 
1885,  1888,  1892,  1893  and  1899  asked  Parliament  for 
statutory  power  to  use  the  streets,  but  the  Postmaster 
General  invariably  refused  to  permit  the  Company's 
Bills  to  proceed,  though  Parliamentary  Select  Com- 
mittees in  1885  and  1893  had  urged  strongly  that  the 
telephone  companies  be  given  adequate  powers  of  way- 


X  CONTENTS 

itavc.  Down  to  189^,  llu-  FustinasttT  General,  repre- 
senting the  Government  of  the  day.  was  influenced  solely 
by  the  desire  to  protect  the  State  Telegraphs  by  hamper- 
ing the  telephone,  in  the  latter  year,  the  Government 
became  willing  to  give  the  National  Telephone  Company 
certain  moderate  powers  of  way-leave;  but  it  had  to  bow 
to  the  will  of  the  Association  of  Municipal  Corporations, 
and  give  the  local  authorities  the  power  to  veto  the 
exercise  of  any  powers  of  way-leave  that  the  Post- 
master General  at  any  time  might  confer  upon  the 
National  Telephone  Company.  The  local  authorities 
demanded  the  power  of  veto,  not  in  order  that  they 
might  regulate  the  time  and  manner  of  opening  the 
streets,  but  in  order  that  they  might  exact  payment  for 
the  use  of  the  streets,  as  well  as  prescribe  the  charges 
which  the  National  Telephone  Company  should  make  to 
its  subscribers.  The  Association  of  Municipal  Corpora- 
tions had  demanded  that  Parliament  itself  fix  those 
charges,  as  well  as  prescribe  the  maximum  dividends 
which  the  Company  might  pay;  but  the  Government 
had  rejected  that  demand,  lest  Parliament  should  pre- 
scribe unremunerative  rates.  The  Government  had  an 
interest  in  the  telephone  charges  being  kept  on  a  re- 
munerative basis,  for  it  contemplated  taking  over  the 
entire  telephone  business  on  December  31,  191 1.  The 
Government  also  received  each  year  10  per  cent,  of  the 
National  Telephone  Company's  gross  earnings  by  way 
of  royalty.  Manchester,  in  1894,  was  the  first  city  to 
give  the  National  Telephone  Company  permission  to 
use  the  streets;  and  as  late  as  September,  1807,  only  fifty- 
nine  cities  in  the  United  Kingdom  had  followed  Man- 
chester's example. 

CHAPTER  VII 

The  Duke  of  Marlborough's  Promise  and  Retr.\ction  .  .  99 
In  August,  1891,  the  Duke  of  Marlborough,  the  head 
of  The  New  Telephone  Company,  announced  that  his 
Company  could  make  a  profit  of  12  per  cent,  to  15  per 
cent,  a  year  while  giving  Metropolitan  London  an  "un- 
limited user"  service  at  $50  or  $60  a  year.     In   Septem- 


CONTENTS  xi 

ber,  1892,  after  The  New  Telephone  Company  had  been 
absorbed  by  the  National  Telephone  Company,  the 
Duke  of  Marlborough  withdrew  his  previous  statements, 
saying  he  had  "bleated  a  good  deal  about  a  $50  tele- 
phone." The  prospectus  of  The  New  Telephone  Com- 
pany had  announced  that  the  cost  of  installing  telephone 
exchanges  would  average  about  $170  per  subscriber's 
wire,  in  the  United  Kingdom  as  a  whole.  At  that  time 
the  National  Telephone  Company's  capitalization  was 
$350  per  telephone  in  use,  of  which  sum  about  $120  was 
"water."  A  large  and  influential  section  of  the  public 
refused  to  accept  the  Duke  of  Marlborough's  retraction ; 
and  to  this  day  it  has  insisted  that  a  telephone  plant 
could  be  installed  in  Metropolitan  London  for  less  than 
$200  per  subscriber's  wire,  and  that  an  unlimited  user 
service  could  be  given  for  $50  a  year  per  subscriber. 
Engineering  estimates  to  that  effect  were  submitted  to 
Parliamentary  Select  Committees  by  the  London  County 
Council  in  1895  and  1898.  Mr.  W.  H.  Preece,  Engineer- 
in-Chief  to  Post  Office,  and  Mr.  J.  C.  Lamb,  assistant 
Secretary  to  Post  Office,  rejected  those  estimates.  In 
March,  1906,  the  Post  Office  Metropolitan  London  tele- 
phone plant  had  cost  $270  per  telephone  in  use.  The 
Post  Office,  upon  opening  its  Metropolitan  London  tele- 
phone exchanges,  in  March,  1902,  rejected  the  public 
request  for  a  $50  unlimited  user  tariff.  It  established 
an  unlimited  service  tariff  of  $85  a  year,  but  only  in 
deference  to  public  opinion.  It  would  have  preferred  to 
establish  the  measured  service  tariff  exclusively,  believ- 
ing that  the  unlimited  service  tariff  is  unsound  in  prin- 
ciple, and  defensible  only  on  grounds  of  political  ex- 
pediency. 

CHAPTER  VIII 

The  Select  Committee  of  1895 115 

A  Select  Committee  of  the  House  of  Commons  is  ap- 
pointed to  inquire  and  report  "whether  the  provision 
now  made  for  the  telephone  service  in  local  areas  is 
adequate,  and  whether  it  is  expedient  to  supplement  or 
improve  the   provision    by   the   granting    of   licenses   to 


xii  CONTENTS 

local  authorities  or  otherwise."  Mr.  W.  H.  Preece, 
Engineer-in-Chief  to  Post  Office,  and  Mr.  J.  C.  Lamb, 
Assistant  Secretary  to  Post  Office,  reject  the  engineering 
estimates  submitted  by  the  advocates  of  municipal  tele- 
phone exchanges.  Mr.  Lamb  argues  that  under  the  ex- 
isting arrangements  the  Government  is  able  to  protect 
the  rights  of  the  public  as  users  of  the  telephone;  that 
the  establishment  of  competing  municipal  telephone 
exchanges  would  be  liable  to  result  in  the  telephone 
tariffs  becoming  unremunerative,  a  state  of  things  to  be 
avoided,  seeing  that  the  Post  Office  in  all  probability 
would  take  over  the  entire  telephone  business  on 
December  31,  191 1.  The  testimony  of  Mr.  H.  E.  Clare, 
Deputy  Town  Clerk  of  Liverpool,  and  official  repre- 
sentative of  the  Association  of  Municipal  Corporations, 
shows  that  the  members  of  the  Association  at  heart  are 
aware  that  the  policy  of  limiting  the  life  of  franchises 
and  providing  for  compulsory  sale  at  structural  value, 
checks  the  investment  of  capital  and  raises  the  cost  of  the 
service  to  the  public.  The  Committee  makes  no  report; 
but  its  chairman,  the  Postmaster  General,  is  said  to  have 
submitted  a  draft  report  disapproving  the  policy  of 
granting  telephone  licenses  to  the  municipalities. 

CHAPTER  IX 

The  London  County  Council  Episode  ....  125 
From  1890  to  1899,  the  National  Telephone  Company 
in  vain  applied  to  the  London  County  Council  for  per- 
mission to  put  its  wires  under  the  streets.  In  1899 
negotiations  were  broken  off,  and  the  deadlock  thus 
established  was  finally  broken  by  the  Post  Office  in 
November,  1901.  The  London  County  Council  tried  to 
use  the  power  of  veto  given  it  by  the  Act  of  1892,  first, 
for  the  purpose  of  prescribing  the  National  Telephone 
Company's  tariff;  second,  for  the  purpose  of  compelling 
the  Company  to  agree  to  grant  free  intercommunication 
between  its  subscribers  and  the  subscribers  to  the  pro- 
posed Post  Office  Metropolitan  London  Telephone  Ex- 
changes. From  1899  to  1901,  inclusive,  the  Post  Office 
cooperated  with  the  London  County  Council  in  blocking 


CONTENTS  xiii 

the  efforts  of  the  National  Telephone  Company  to  get 
underground  way-leaves  in  the  Administrative  County 
of  London,  area  121  square  miles. 

CHAPTER  X 

The  City  of  London   Episode  133 

The  City  of  London,  desiring  to  compel  the  National 
Telephone  Company  to  permit  the  city  authorities  to  fix 
the  Company's  tariff,  never  has  given  its  consent  to  the 
National  Telephone  Company  laying  its  wires  under  the 
streets  or  erecting  poles  in  the  streets.  In  November, 
1901,  the  Post  Office  overrode  the  City  of  London,  con- 
tracting to  lay  such  underground  wires  for  the  Company 
as  it  should  suit  the  pleasure  of  the  Post  Office  to  let 
the  Company  have. 

CHAPTER  XI 

The  Glasgow  Episode 139 

The  National  Telephone  Company  asks  the  Corpora- 
tion of  Glasgow  for  underground  way-leaves,  in  order 
that  it  may  replace  its  earth-return  circuit  with  a  metal- 
lic circuit,  and  thus  give  the  public  an  efficient  as  well 
as  an  adequate  service.  The  Corporation  refuses  way- 
leaves,  for  two  reasons.  First,  it  wishes  the  Company's 
service  to  remain  bad,  in  order  that  it  may  create  a  public 
dissatisfaction  which  shall  compel  the  Government  to 
abandon  its  past  policy  of  refusing  to  give  any  local 
authority  a  telephone  license.  Second,  after  obtaining 
a  telephone  license,  Glasgow  proposes  to  install  an 
underground  metallic  circuit  plant,  and  to  destroy  the 
Glasgow  plant  of  the  National  Telephone  Company, 
that  Company  being  handicapped  by  lack  of  underground 
way-leaves.  In  September,  1897,  the  Government  ap- 
pointed Andrew  Jameson  (now  Lord  Ardwall),  Sheriff 
of  Perthshire,  a  Commissioner  to  inquire  into  the  tele- 
phone service  at  Glasgow.  The  Commissioner  reported 
that  the  continued  inefficiency  of  the  telephone  service 
at  Glasgow  for  the  most  part  was  due  to  the  Corpora- 
tion's refusal  to  give  the  National  Telephone  Company 


xiv  CONTENTS 

underground  way-leaves ;  that  such  refusal  was  neither 
reasonable  nor  justifiable  on  grounds  of  public  policy  or 
any  other  grounds,  unless  it  be  deemed  that  the  Corpora- 
tion were  justified  in  their  refusal  because  they  desired 
to  establish  a  municipal  telephone  system,  and  to  place 
the  National  Telephone  Company  "at  an  enormous  dis- 
advantage" in  competing  with  them  for  the  patronage 
of  the  public. 

CHAPTER  XII 

Mr.  R.  W.  Hanbury,  Financial  Secretary  to  the  Treas- 
ury, AND  Representative,  in  the  House  of  Commons, 
OF  the  Postmaster  General,  the  Duke  of  Norfolk, 
Attacks  the  National  Telephone'  Company        .        .177 

Mr.  James  Caldwell,  M.  P.  for  Lanark,  makes  a  motion 
asking  the  Government  to  abandon  its  past  policy  of  re- 
fusing to  grant  telephone  licenses  to  local  authorities. 
The  motion  is  seconded  by  Mr.  G.  Boscawen,  M.  P. 
for  Kent,  Tunbridge,  and  Private  Secretary  to  the  Chan- 
cellor of  the  Exchequer,  Sir  Alichael  Hicks-Beach.  Mr. 
R.  W.  Hanbury  replies  on  behalf  of  the  Government, 
offering  to  refer  to  a  Select  Committee  the  question  of 
municipal  telephone  licenses.  He  prefers  a  series  of 
charges  which  prove  most  damaging  to  the  National 
Telephone  Company,  though  they  would  not  have 
passed  muster  with  a  well  informed  body  of  listeners  or 
readers.  Why  Parliament  and  the  public  were  not  well 
informed. 

CHAPTER  XIII 

The  Evidence  Presented  Before  the  Select  Committee  of 

1898 194 

The  House  of  Commons  orders  the  appointment  of  a 
Select  Committee  to  consider  and  report  upon  the  ques- 
tion of  granting  telephone  licenses  to  local  authorities. 
Sir  Robert  Hunter,  Solicitor  to  Post  Office,  urges  the 
necessity  of  giving  the  National  Telephone  Company 
adequate  way-leaves.  Mr.  Forbes,  Chairman  National 
Telephone  Company,  and  Mr.  Gaine,  General  Manager, 


CONTENTS  XV 

argue  that  under  the  burdens  and  disabilities  imposed 
upon  the  Company  by  Parliament,  the  Company's 
charges  must  necessarily  be  relatively  dear,  while  its 
service  must  be  less  adequate  and  less  efficient  than  the 
Company  vi'ould  wish.  Mr.  Arnold  Morley,  Postmaster 
General  from  1892  to  1895,  as  well  as  Mr.  J.  C.  Lamb, 
Assistant  Secretary  to  Post  Office,  express  themselves 
against  competition  in  the  telephone  business.  The  As- 
sociation of  Municipal  Corporations  expresses  itself  in 
favor  of  municipal  telephone  exchanges,  as  the  alterna- 
tive to  the  Post  Office  taking  over  the  entire  telephone 
business.  The  evidence  as  to  the  manner  in  which  the 
National  Telephone  Company  exercised  its  right  to  re- 
fuse service.  The  evidence  as  to  Company's  policy  and 
practice  in  the  matter  of  establishing  telephone  exchang- 
es in  small  places  and  in  thinly  populated  districts. 

CHAPTER  XIV 

The  Report  of  the  Select  Committee,  1898  .        .    215 

The  Select  Committee  makes  a  report  that  is  not  sup- 
ported by  the  evidence  that  had  been  presented.  It 
recommends  "immediate  and  effective  competition  by 
either  the  Post  Office  or  the  local  authority,"  though 
there  is  grave  doubt  whether  Parliament  and  the  Gov- 
ernment can  authorize  such  competition  without  violat- 
ing "the  equity  of  the  understanding"  that  had  obtained 
between  the  Government  and  the  National  Telephone 
Company  at  the  time  of  the  so-called  purchase  of  the 
long-distance  telephone  wires,  in  the  year  1892. 

CHAPTER  XV 

Parliament    Authorizes    All-Round    Competition    with 

THE  National  Telephone  Company        ....    239 

Mr.  R.  W.  Hanbury,  Financial  Secretary  and  Repre- 
sentative of  the  Postmaster  General,  speaks  of  the  Na- 
tional Telephone  Company  as  if  it  were  a  public  enemy, 
if  not  a  criminal.  The  Telegraph  Act,  1899,  authorizes 
unfair  competition  with  the  National  Telephone  Com- 
pany.    It  knocks  fully  25  per  cent,  off  the  market  value 


xvi  CONTENTS 

of  the  National  Telephone  Company's  securities;  and  it 
makes  Mr.  Hanbury  a  member  of  the  Cabinet.  In  all 
other  respects  it  is  an  utter  failure.  It  is  partially 
abandoned  in  1901,  and  completely  abandoned  in  1905. 
The  reason  for  the  complete  failure  of  the  Telegraph 
Act,  1899,  is  the  conservatism  of  the  local  authorities, 
and  the  inability  of  adjoining  local  authorities  to  co- 
operate. 

CHAPTER  XVI 

The  Metropolitan  London  Agreement,  1901  .  .  .  269 
The  Post  Office  harasses  the  National  Telephone 
Company  into  granting  a  request  which  the  Post  Office 
could  not  make  with  fairness,  to-wit,  free  intercommuni- 
cation between  the  Company's  Metropolitan  London  sub- 
scribers and  the  subscribers  to  the  proposed  Post  Office 
Metropolitan  London  telephone  exchanges.  So  far  as 
Metropolitan  London  is  concerned,  the  Government 
abandons  the  Telegraph  Act,  1899,  in  November,  1901. 
The  act  achieved  nothing  of  benefit  to  the  public  that 
could  not  have  been  attained  in  1899  by  means  of  friendly 
negotiation  with  the  National  Telephone  Company. 

CHAPTER  XVII 

The    Agreement    of    1905 287 

The  Telegraph  Act,  1899,  proves  a  complete  failure 
also  for  that  part  of  the  United  Kingdom  known  as  the 
Provinces ;  and  it  is  abandoned  in  February,  1905.  The 
Post  Office  agrees  to  purchase,  at  reconstruction  value, 
on  December  31,  191 1,  the  National  Telephone  Company's 
plant.  That  arrangement  will  get  the  Company  out  of 
the  way,  in  191 1;  and  will  leave  Parliament  free  to 
determine  whether  the  local  telephone  service — as  dis- 
tinguished from  the  long-distance  service — thenceforth 
shall  be  conducted  by  the  Post  Office  or  by  the  local 
authorities.  The  agreement  is  referred  to  a  Select 
Committee  of  the  House  of  Commons,  which  Committee 
makes  two  recommendations  which  the  Government  de- 
clines   to   accept,   on   the   ground   that    they    would    be 


CONTENTS  xvii 

respectivelj'  "an  infringement  of  a  statutory  right" 
and  a  "most  unfair"  action.  A  third  recommendation 
made  by  the  Committee,  if  it  had  been  carried  out, 
would  have  inflicted  upon  the  holders  of  the  securities 
of  the  National  Telephone  Company  even  more  serious 
loss  than  had  inflicted  the  Report  of  the  Select  Committee 
on  Telephones,  1898,  and  the  Telegraph  Act,  1899.  The 
agreement  of  1905  will  leave  the  British  public  without 
an  adequate  telephone  service  until  December  31,  191 1. 

CHAPTER  XVIII 

The  Municipal  Telephone  Exchanges  of  Glasgow, 
Brighton,  Hull,  Swansea,  Portsmouth  and  Tun- 
bridge  Wells 312 

The  Corporation  of  Glasgow  embarks  in  the  telephone 
business,  expecting  to  install  a  plant  for  about  $95  per 
subscriber's  line.  In  May,  1906,  its  expenditure  had 
been  $183  per  subscriber's  line.  The  corporation  lays  its 
wires  under  the  streets ;  at  the  same  time  denying  the 
National  Telephone  Company  all  public  way-leaves.  It 
expects  to  destroy  the  Company's  business  in  Glasgow; 
but  it  is  beaten  "to  a  stand-still."  In  September,  1906, 
the  Corporation  sold  its  plant  to  the  Post  Office  for 
$1,525,000,  that  is,  at  a  net  loss  of  $58,980.  Shortly 
afterward  the  Postmaster  General  announced  that  he 
would  have  to  reconstruct  the  main  exchange,  as  well 
as  replace  every  one  of  the  12,800  subscribers'  telephones 
in  use.  Those  operations  probably  will  cost  from  $500,- 
000  to  $750,000.  The  Postmaster  General  also  an- 
nounced that  he  would  have  to  revise,  that  is,  raise, 
the  tarififs  enforced  by  the  Corporation, 

In  October,  1906,  the  Postmaster  General  paid  the 
Corporation  of  Brighton  $245,000  for  its  telephone 
plant,  enabling  the  corporation  to  withdraw  with  a  loss 
of  $12,250.  To  the  Corporations  of  Hull,  Swansea  and 
Portsmouth,  the  Postmaster  General  offered  consider- 
ably less  than  these  corporations  had  expended  upon 
plant.  Swansea  subsequently  sold  its  plant  to  the  Na- 
tional Telephone  Company.  Tunbridge  Wells,  the  only 
other    municipality    that    had    gone    into    the   telephone 


^viii  CONTENTS 

business,  had  sold  out  to  the  National  Telephone  Com- 
pany in  November,  1903,  after  two  and  one-half  years 
of  operation. 

CHAPTER  XIX 

The  Post  Office  Monopoly  and  Wireless  Telegraphy  .  ^,2,7 
The  Government,  in  1889,  resolved  to  acquire  the 
monopoly  of  submarine  telegraphy  to  neighboring 
European  countries.  In  1896,  it  failed  to  purchase  the 
patents  of  Mr.  Marconi,  inventor  of  wireless  telegraphy. 
In  1904,  the  Government  carried  the  Wireless  Teleg- 
raphy Act,  largely  for  the  purpose  of  protecting  the 
revenues  of  the  Government  submarine  cables.  The 
Government  curtails  the  use  of  wireless  telegraphy  both 
across  sea  and  overland.  The  Government  hampers 
the  Boy  Messenger  and  District  Service  Companies,  for 
the  purpose  of  protecting  the  Post  Office  Monopolies. 
An  episode  from  the  reign  of  Charles  II. 

CHAPTER  XX 
Conclusion 348 

Index 365 


PUBLIC  OWNERSHIP  AND  THE 
TELEPHONE  IN  GREAT  BRITAIN 


xviii  CONTENTS 

business,  had  sold  out  to  the  National  Telephone  Com- 
pany in  November,  1903,  after  two  and  one-half  years 
of  operation. 

CHAPTER  XIX 

The  Post  Office  Monopoly  and  Wireless  Telegraphy  .  ^^7 
The  Government,  in  1889,  resolved  to  acquire  the 
monopoly  of  submarine  telegraphy  to  neighboring 
European  countries.  In  1896,  it  failed  to  purchase  the 
patents  of  Mr.  Marconi,  inventor  of  wireless  telegraphy. 
In  1904,  the  Government  carried  the  Wireless  Teleg- 
raphy Act,  largely  for  the  purpose  of  protecting  the 
revenues  of  the  Government  submarine  cables.  The 
Government  curtails  the  use  of  wireless  telegraphy  both 
across  sea  and  overland.  The  Government  hampers 
the  Boy  Messenger  and  District  Service  Companies,  for 
the  purpose  of  protecting  the  Post  Office  Monopolies. 
An  episode  from  the  reign  of  Charles  II. 

CHAPTER  XX 
Conclusion 348 

Index 365 


PUBLIC  OWNERSHIP  AND  THE 
TELEPHONE  IN  GREAT  BRITAIN 


CHAPTER  I 

Introduction 

SCOPE  OF  THE  INQUIRY 

Four  factors  have  shaped  the  telephone  poHcy  of 
Great  Britain.  They  have  been  :  the  desire  of  the  State 
to  protect  the  national  telegraphs  from  competition  from 
the  telephone ;  the  Duke  of  Marlborough's  letters  to  The 
Times,  alleging  that  it  was  possible  to  supply  telephone 
service  to  Metropolitan  London  on  the  basis  of  $50  a 
year  for  unlimited  user ;  the  desire  of  the  Municipalities 
to  regulate  the  charges  of  the  National  Telephone  Com- 
pany, a  licensee  of  the  Postmaster  General;  and  the 
political  ambition  of  Mr.  R.  W.  Hanbury,  who,  as  Fi- 
nancial Secretary  to  the  Treasury,  in  the  period  from 
1895  to  1900  represented  in  the  House  of  Commons,  the 
Postmaster  General,  the  Duke  of  Norfolk. 

The  Government  having  acquired  the  monopoly  of 
the  telegraph  business  in  1869,  the  logical  thing  for  it 
to  do  upon  the  appearance  of  the  telephone,  in  1876-77, 
would  have  been  to  purchase  the  rights  of  the  patentees 
of  the  telephone,  and  to  make  the  telephone  a  supple- 
ment to  the  telegraph.  But  the  Government  was  unwill- 
ing to  engage  in  any  further  industrial  ventures,  because 


4  THE   TELEPHONE   IN    GREAT   BRITAIN 

of  the  unsatisfactory  working  of  the  experiment  of  na- 
tional telegraphs  inaugurated  in  1868.  Under  the  cir- 
cumstances the  Government  granted  companies  licenses 
to  engage  in  the  telephone  business,  incorporating  in 
those  licenses  various  restrictions  upon  the  licensees, 
designed  to  protect  the  State  telegraphs  from  the  tele- 
phone. In  1884,  1892,  1899,  1 90 1  and  1905,  the  Gov- 
ernment changed,  or  modified,  its  telephone  policy ;  but 
it  always  adhered  to  two  principles :  to  protect  the  State 
telegraphs  as  much  as  public  opinion  would  permit ;  and 
to  secure  the  ultimate  purchase  of  the  licensees'  tele- 
phone plants  at  cost  of  replacement,  that  is,  with  no 
allowance  for  earning  power  or  good-will.  The  Gov- 
ernment invariably  preferred  the  interests  of  the 
national  treasury  to  the  rights  of  the  public  as  users  of 
the  telephone. 

In  the  fall  of  1891,  the  Duke  of  Marlborough  in- 
augurated a  campaign  on  behalf  of  The  New  Telephone 
Company,  alleging  that  the  Company  could  make  a  profit 
of  12  to  15  per  cent,  a  year  while  serving  Metropolitan 
London  under  a  tariff  of  $50  a  year  for  unlimited  user 
service.  In  the  fall  of  1892,  after  The  New  Telephone 
Company  had  been  absorbed  by  the  National  Telephone 
Company,  the  Duke  of  Marlborough  retracted  the  state- 
ments made  in  The  Times  letters,  saying  that  he  had 
"bleated  a  good  deal  about  a  $50  telephone."  A  large 
and  influential  section  of  the  public  refused  to  accept 
the  Duke  of  Marlborough's  retraction;  and  continued 


INTRODUCTION  5 

to  demand  for  Metropolitan  London  an  unlimited  user 
tariff  of  $50  a  year,  and  for  the  large  cities  outside  of 
London  an  unlimited  user  tariff  of  $25  a  year.  Those 
demands  were  supported  also  by  the  argument  that  the 
National  Telephone  Company  could  afford  to  grant  the 
aforesaid  rates  were  it  not  for  the  fact  that  in  the  year 
1890  the  National  Telephone  Company  had  raised  its 
capitalization  to  $15,525,000,  through  the  injection  of 
$6,460,000  of  "water." 

Down  to  1892  the  Government  adhered  to  the  policy 
that  the  National  Telephone  Company  should  have  no 
right  to  erect  a  pole  in  a  street  or  to  lay  a  wire  under  a 
street,  lest  the  telephone  should  become  too  formidable 
a  competitor  of  the  State  telegraphs.  In  1892,  the 
Government  modified  its  past  policy,  and  became  willing 
that  the  Company  should  have  such  rights  to  erect  poles 
in  the  streets  and  to  lay  wires  under  the  streets  as  the 
Postmaster  General  should  see  fit  to  let  the  Company 
have  from  day  to  day  and  from  place  to  place.  There- 
upon the  Association  of  Municipal  Corporations,  one  of 
the  most  powerful  political  organizations  in  England 
and  Wales,  demanded  for  the  local  authorities  the  right 
to  veto  the  exercise  of  any  way-leave  powers  that  the 
Postmaster  General  at  any  time  or  in  any  place  might 
confer  upon  the  National  Telephone  Company.  The 
local  authorities  demanded  the  power  of  veto  in  order 
that  they  might  be  able  to  make  a  charge  for  the  use 
of  the  streets,  as  well  as  fix  the  tariffs  of  the  National 


6  THE  TELEPHONE   IN    GREAT   BRITAIN 

Telephone  Company.  They  were  given  the  power  of 
veto ;  and  they  used  it  in  such  a  way  as  to  retard  for  a 
number  of  years  the  replacement  of  the  earth-return 
circuit  telephone  by  the  metallic  circuit  telephone. 
Some  local  authorities,  such  as  the  London  County 
Council,  the  Corporation  of  the  City  of  London,  the 
Corporation  of  Glasgow  and  the  Corporation  of  Brigh- 
ton, never  have  given  the  National  Telephone  Company 
poAver  to  erect  a  pole  in  a  street  or  to  lay  a  wire  under  a 
street. 

For  all  practical  purposes  the  National  Telephone 
Company  remained  without  way-leaves  in  the  streets 
until  the  year  1897.  The  resulting  inadequacy  and 
inefficiency  of  the  service  offered  the  public  by  the 
National  Telephone  Company,  led  to  widespread  popu- 
lar dissatisfaction  with  the  Company.  In  1898,  Mr. 
R.  W.  Hanbury,  Financial  Secretary  to  the  Treasury 
and  Representative  in  the  House  of  Commons  of  the 
Postmaster  General,  the  Duke  of  Norfolk,  resolved  to 
take  advantage  of  the  aforesaid  widespread  discontent, 
and  to  make  himself  the  parliamentary  leader  of  the 
rising  movement  in  favor  of  municipal  telephone  ex- 
changes. Mr.  Hanbury's  parliamentary  activity  re- 
sulted in  the  enactment  of  the  Telegraphs  Act,  1899. 
That  measure,  in  the  year  1900,  made  Mr.  Hanbury  a 
Member  of  the  Cabinet  in  the  reorganized  Salisbury 
Ministry;  and  it  knocked  fully  25  per  cent,  off  the 
market  value  of  the  securities  of  the  National  Tele- 


INTRODUCTION  7 

phone  Company.  In  all  other  respects  it  was  a  com- 
plete failure.  In  1901  and  1905.  respectively,  the  Tele- 
graphs Act,  1899,  in  effect  was  repealed  by  the  political 
Party  which  had  enacted  it. 

The  policy  of  municipal  competition  with  the  Na- 
tional Telephone  Company  proved  a  complete  failure, 
partly  because  of  the  conservatism  of  the  municipalities, 
partly  because  of  the  inability  of  adjoining  municipali- 
ties to  overcome  parochial  jealousies  and  to  cooperate 
in  supplying  a  common  telephone  service. 

Glasgow  entered  upon  the  telephone  business  with 
the  avowed  purpose  of  destroying  the  National  Tele- 
phone Company's  business  and  property  in  Glasgow. 
It  was  beaten  "to  a  stand-still"  by  the  Company. 

The  municipal  telephone  ventures  of  Brighton,  Hull, 
Portsmouth,  Swansea  and  Tunbridge  Wells  were  no 
more  successful  than  the  Glasgow  venture. 

In  1901  and  1905,  respectively,  the  Government  con- 
tracted to  purchase  on  December  31,  191 1,  at  cost  of 
replacement,  the  property  of  the  National  Telephone 
Company.  At  that  date  Parliament  will  decide  whether 
the  Post  Office  shall  retain  possession  of  the  property 
purchased  of  the  National  Telephone  Company,  or  shall 
sell  the  property  to  the  several  local  authorities. 


CHAPTER  II 

THE  TELEPHONE  LICENSES  OF  1881  AND  1884 

The  Government  declines  to  buy  the  telephone  patents.  Mr. 
Justice  Stephen  holds  that  the  telephone  is  an  infringement  of 
the  Postmaster  General's  telegraph  monopoly.  The  Government 
waives  the  Postmaster  General's  monopoly  rights,  upon  terms  de- 
signed to  restrict  the  development  of  the  telephone  business.  The 
Postmaster  General  by  means  of  an  administrative  ruling  in- 
fringes the  statutory  rights  of  the  owners  of  the  telephone  pat- 
ents. Public  opinion  compels  the  Government  to  relax  somewhat 
its  restrictive  measures.  The  Government,  in  effect,  refuses  to 
permit  the  Post  Office  to  engage  in  the  telephone  business.  The 
refusal  is  prompted  in  part  by  the  unsatisfactory  working  of  the 
experiment  of  State  telegraphs,  inaugurated  in  1868. 

In  December,  1876,  and  July,  1877,  respectively, 
Mr.  Graham  Bell  and  Mr.  Edison  obtained  from  the 
British  Government  patents  for  the  telephone.  In 
1878,  Professor  Hughes,  of  England,  invented — but 
refused  to  patent — the  microphone,  which  made  the 
telephone  "commercially"  available.  In  that  same  year 
was  established  the  Telephone  Company,  Limited,  which 
acquired  Mr.  Bell's  patent  rights  for  the  United  King- 
dom. In  the  following  year  was  established  the  Edi- 
son Telephone  Company  of  London,  which  acquired 
Mr.  Edison's  rights  for  the  United  Kingdom.  Litiga- 
tion over  patent  rights  between  the  two  companies  soon 
followed.   Partly  for  the  purpose  of  ending  that  litiga- 


TELEPHONE  LICENSES   OF  1881  AND   1887  9 

tion,  both  companies  began  negotiations  with  the  Post 

T  )  .1        r>  .    i   Office  for  the  sale  of  their  iiatent  rights.^ 
Telephone  Patents  ^  '^ 

offered  to  Those  negotiations  failed ;  and  in  May, 

Government  jgg^^  ^j^^  United  Telephone  Company, 

Limited,  purchased  the  patent  rights  of  the  litigants 
for  the  sum  of  $1,500,000." 

In  the  meantime,  in  1878,  the  Government  had  made 
an  unsuccessful  effort  to  protect  the  State  Telegraphs 
from  the  Telephone.  While  the  Telegraph  Bill,  1878, 
had  been  before  the  House  of  Lords,  the  Postmaster 
General  had  inserted  the  following  clause :  "The  term 
telegraph  in  addition  to  the  meaning  assigned  to  it  by 
that  Act  [of  1869]  shall  include  any  apparatus  for 
transmitting  messages  or  other  communications  with 
the  aid  of  electricity,  magnetism,  or  any  other  like 
agency."  The  House  of  Commons,  however,  had  re- 
jected the  clause,  and  the  Government  had  acquiesced.^ 
Dr.  Cameron,  M.  P.,  for  Glasgow,  College  Division, 
has  stated  that  he  induced  the  Government  to  accept  the 
rejection,  the  clause  in  question  appearing  to  him  to  be 
a  proposal  to  confiscate  the  property  of  the  patentees. 

^  The  Times;  January  20,  1899:  The  Case  of  the  National 
Telephone  Company,  by  a  Correspondent ;  and  Hansard's  Parlia- 
mentary Debates:  March  29,  1892,  p.  167,  Dr.  Cameron,  Glasgow. 
Compare :  Report  from  the  Select  Committee  on  the  Telephone 
Service.  1895  ;  q.  9,  Mr.  J.  C.  LamI),  Assistant  Secretary  to  Post 
Office. 

'Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s  ;  q.  4963,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone 
Company. 

'Hansard's  Parliamentary  Debates;  July  29,  1884;  p.  869,  Mr. 
W.  E.  Gladstone,  First  Lord  of  the  Treasury;  August  7,  1884,  p.  143, 
and  March  29,   1892,  p.   166,   Dr.  Cameron. 


10  THE   TELEPHONE    IN    GREAT    BRITAIN 

In  the  fall  of  1879,  the  Edison  Telephone  Company 
of  London  announced  that  it  would  establish  telephone 
exchanges  in  Metropolitan  London ;  and  on  November 
27,  and  December  20,  1879,  respectively,  the  Post- 
master General,  through  the  Attorney-General,  brought 
suit  against  the  Edison  and  Bell  Com- 
Ci'Heral's  Mo-  panics  for  infringement  of  the  Post- 
iwf>oly  covers  master  General's  monopoly  acquired 
the  Telephone       ^^^^^^^  ^j^^  Telegraph  Act,  1869.     The 

case  was  tried  before  Mr.  Baron  Pollock  and  Mr.  Jus- 
tice Stephen,  of  whom  the  latter  rendered  the  verdict, 
on  December  20,  1880.^  The  Court  held  that  "every 
organized  system  of  communication  by  means  of  elec- 
tricity, and  any  communication  by  means  of  wires  ac- 
cording to  any  preconcerted  system  of  signals,  were 
within  the  monopoly  conferred  under  the  Act  of  1869."" 
The  decision,  it  will  be  noted,  held  that  the  Postmaster 
General's  Monopoly  covered  future  inventions. 

The  United  Telephone  Company,  in  December,  1880, 
made  preparations  to  appeal  from  the  decision  of  Mr. 
Justice  Stephen.  Thereupon  the  Postmaster  General 
offered  to  grant  the  Company  licenses  to  establish  and 
operate  telephone  exchanges,  on  condition  that  the 
Company  w^aive  their  right  of  appeal.-^  The  ofifer  was 
accepted.     Many  years  later,  the  patentees  of  the  ap- 

^  La'M  Reports,  6  Queen's  Bench   Division,  p.  244. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  3  to 
S,   Sir   Robert  Hunter,   Solicitor  to   Post   Office. 

^Report  from  the  Select  Committee  on  Telephone  and  Telegraph 
Wires,  1885;  q.  1247  to  1250,  Mr.  J.  S.  Forbes,  Deputy  Chairman 
United  Telephone  Company. 


TELEPHONE  LICENSES  OF  1881  AND   1887         11 

paratus  for  wireless  telegraphy  also  acquiesced  in  the 
decision  rendered  by  Mr.  Justice  Stephen  in  1880. 

The  licenses  conferred  by  the  Postmaster  General 
merely  waived  the  monopoly  rights  of  the  Post  Office ; 
they  did  not  confer  "power  to  erect  poles  and  wires  on, 
or  to  place  wires  under,  any  highway  or  private  prop- 
erty." Such  power  was  to  be  obtained  from  the  local 
authorities  and  private  persons  concerned.  Nor  did 
the  Postmaster  General  waive  the  right  of  the  Post 
Office  to  install  and  operate  telephone  exchanges ;  or  to 
grant  licenses  to  companies  other  than  the  United  Tele- 
phone Company  or  its  offspring  companies.  In  fact, 
the  Post  Office  immediately  established  telephone  ex- 
changes in  several  of  the  so-called  provincial  towns ;' 
and  in  July,  1882,  Mr.  Fawcett,  Postmaster  General, 
made  the  following  announcement  in  the  House  of 
Commons :  "After  giving  the  matter  very  careful  con- 
sideration, I  have  come  to  the  conclusion  that  it  would 
not  be  in  the  interest  of  the  public  to  create  a  monopoly 
in  relation  to  the  supply  of  telephonic  communication. 
I  am,  therefore,  prepared  to  favorably  entertain  the 
proposals  that  may  be  made  to  me  by  responsible  per- 
sons to  grant  new  telephone  licenses  under  conditions 
which  may  be  regarded  as  giving  adequate  protection* 
to  the  public  and  the  Department.  In  case  it  may  be 
supposed  that  inconvenience  may  arise  from  the  multi- 

^  Report  from  the  Select  Committee  on  Telephones,  i8g8;  q.  1109, 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office  ;  and  Parliamentary 
Paper,  No.  201,  1899. 


12  THE   TELEPHONE    IN    GREAT   BRITAIN 

plication  of  wires,  I  may  remark  that  the  Hcense  of  the 
Postmaster  General  to  establish  a  telephone  exchange 
confers  no  special  power  whatever  to  erect  poles  and 
wires  on,  or  to  place  wires  under,  any  highway  or 
private  property.  The  persons  to  whom  a  license  may 
be  given  will  have  to  make  their  own  arrangements 
with  the  local  authorities."^ 

The  licenses  granted  in  1881  and  the  subsequent  years 
contained  a  number  of  restrictions  designed  to  protect 
the  Post  Office  telegraphs  from  serious  competition; 
Th  St  t  Tele-  '^"^  ^°  reimburse  the  Post  Office  for 
graphs  are  such  limited  Competition  as  it  permitted. 

Protected  gy  ^^y  q£  royalties  the  telephone  com- 

panies were  to  pay  10  per  cent,  of  their  gross  receipts. 
In  London,  the  companies  were  restricted  to  areas  with 
a  radius  of  4  or  5  miles;  in  the  provincial  towns  they 
were  restricted  to  areas  with  a  radius  of  i  or  2  miles. 
In  a  few  cases  the  areas  were  made  larger,  the 
royalties  at  the  same  time  being  raised  to  12.5  per  cent, 
of  the  gross  receipts.  The  companies  were  not  allowed 
to  open  public  pay  stations,  lest  the  latter  should  inter- 
fere with  the  Post  Office  Telegraphs'  extensive  trafific 
in  intra-city  telegrams.  In  the  case  of  one  city,  Man- 
chester, the  Post  Office  offered  to  permit  the  install- 
ment of  public  pay  stations,  provided  that  the  charge 
be  24  cents  per  conversation,  which  sum  represented 
the  cost  of  a  twenty  word  intra-city  telegram.  The 
local  company  at  Manchester  had  desired  to  popularize 

^Hansard's  Parliamentary  Debates;  July  17,  1882. 


TELEPHONE  LICENSES  OF  1881  AND   1887         13 

the  telephone  by  making  the  public  pay  station  charge 
two  cents  per  conversation.  Nor  were  the  telephone 
companies  permitted  to  build  so-called  trunk  lines  from 
city  to  city,  lest  the  long  distance  telephone  should  com- 
pete with  the  inter-city  Post  Office  Telegraphs.  The 
Post  Office  offered  to  build  telephone  trunk  lines  for  the 
companies  on  the  basis  of  the  payment  of  an  annual 
rental  of  $50  per  mile  of  double  wire,  plus  50  per  cent, 
of  the  gross  receipts.  The  Lancashire  and  Cheshire 
Company,  which  operated  in  a  region  covered  with 
busy  manufacturing  centers,  offered  to  pay  the  Post 
Office  the  annual  rental  of  $50  per  mile,  on  condition 
that  the  Company  be  permitted  to  give  its  subscribers 
the  free  use  of  the  trunk  lines,  in  order  that  it  might 
popularize  the  telephone.  The  Post  Office  rejected  the 
offer,  stating  that  the  Company  must  charge  subscrib- 
ers who  desired  to  use  the  trunk  lines  an  annual  sum  of 
not  less  than  $2.50  per  mile  of  trunk  line  wire.  Finally, 
all  licenses  were  to  expire  31  years  after  January  31, 
1881,  nothing  whatever  being  stated  as  to  what  should 
become  of  the  property  of  the  licensee,  should  the  Gov- 
ernment decline  to  renew  the  license.* 

*  Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s  ;  q.  4177  to  4180,  Mr.  J.  S.  Forbes,  Chairman  National  Tele- 
phone Company ;  Report  from  the  Select  Committee  on  Telephone 
and  Telegraph  Wires,  1885  ;  q.  996,  997,  1036  and  1037,  Mr.  C. 
Moseley,  Chairman  Lancashire  and  Cheshire  Telephonic  Exchange 
Company  ;  and  q.  366,  Mr.  J.  B.  Morgan,  Director  United  Telephone 
Company;  Report  from  the  Select  Committee  on  Telephones.  1898; 
q.  13  to  31,  Sir  Robert  Hunter,  Solicitor  to  Post  Office;  Hansard's 
Parliamentary  Debates;  May  5,  1884,  Mr.  Fawcett,  Postmaster 
General;  and  April  i,  1898,  p.  1673,  Mr.  Caldwell;  The  Elec- 
trician   (London),    April    28,    1905 ;    Report   from    the   Select    Com- 


14  THE   TELEPHONE    IN    GREAT    BRITAIN 

The  United  Telephone  Company,  the  owner  of  the 
telephone  patents,  limited  its  own  operations  to  Lon- 
don. For  the  rest  of  the  United  Kingdom,  the  Com- 
pany established  subsidiary  companies,  to  whom  it 
rented  telephones.  Each  company  was  given  the  sole 
right  to  use  the  telephone  in  its  area.  In  1882,  the 
Postmaster  General  announced  that  he  would  issue  no 
more  licenses,  unless  the  licensee  should  agree  to  sell 
the  Postmaster  General,  at  a  price  to  be  fixed  by  arbi- 
tration, all  the  telephones  that  he  should  desire.  The 
Postmaster  General  proposed  to  rent  or  sell  the  tele- 
phones to  licensees  who  should  compete  with  the  sub- 
sidiary companies  established  by  the  United  Telephone 
Company.  The  United  Telephone  Company  refused 
to  submit  to  this  invasion  of  the  monopoly  rights  guar- 
anteed to  it  and  to  every  owner  of  a  patent  for  a  period 
Telet>hon  ^^  fourteen  years  by  the  patent  laws 

Industry  is  of  the  United   Kingdom.     The  result 

Paralysed  ^^^g    ^j^^^    -j^    ^}^g    p^j-j^j    ^^^^    jgg^   to 

1884,  only  eight  companies  out  of  seventy-seven  com- 
panies that  applied  for  a  telephone  license  succeeded  in 
obtaining  a  license.*  The  Postmaster  General  was 
actuated  by  the  desire  to  secure  competition  in  the  tele- 
phone service.  But  it  is  clear  beyond  the  necessity  of 
argument  that  he  was  guilty  of  usurpation  of  power 

mittee  on  Telegraphs  Bill.  1892;  q.  10  to  19,  Mr.  J.  C.  Lamb,  Assis- 
tant Secretary  to  Post  Office,  in  charge  of  the  Telegraph  business  ; 
and  Hansard's  Parliamentary  Debates;  May  22,  1884,  P-  1059,  Mr. 
Dwyer  Gray. 

^Hansard's  Parliamentary  Debates;  May  22,   X884,  pp.   1056  and 
986,  Mr.  Dwyer  Gray. 


TELEPHONE  LICENSES   OF   1881   AND   1887         15 

when,  by  an  administrative  ruling,  he  sought  to  annul 
the  patent  laws  of  the  United  Kingdom  so  far  as  were 
concerned  the  owners  of  the  telephone  patents. 

The  Government's  policy  of  protecting  the  Post 
Office  Telegraphs  and  invading  the  rights  of  the  owners 
of  the  telephone  patents  practically  paralyzed  the  tele- 
phone industry.    In  the  spring  of  1885,  there  were  only 

„  .,.  ,  '?,8oo  telephone  subscribers  in  Metro- 

Brttish  ^  ^ 

Telephone  politan   London.      In   the   rest   of   the 

Statistics  United    Kingdom    there    were    about 

9,000  subscribers  in  about  75  cities  and  their  outlying 
suburbs  and  villages.^ 

In  the  United  States,  on  January  i,  1885,  the  Ameri- 
can Bell  Telephone  Company  was  operating  telephone 
exchanges  in  772  cities  and  towns  and  about  300  of 
U  -f  J  Cf  t  their  adjoining  suburbs.    Its  total  num- 

Telephone  ber  of  subscribers  was  134,847.     The 

Statistics  Company  had  established  "main"  ex- 

changes in  535  towns  and  places  with  a  population  of 
not  to  exceed  10,000;  and  "branch"  exchanges  in  about 
120  other  small  places.  Its  subscribers  in  places  of  not 
to  exceed  10,000  people,  numbered  28,145.^ 

In  the  United  States  there  were,  in  1880,  580  cities 
with  a  population  of  4,000  people,  and  more  than  4,000 

*  Report  from  the  Select  Committee  on  Telephones  and  Tele- 
graph Wires,  1885  ;  q.  364,  367,  458  and  369,  Managing  Director 
United  Telephone  Company;  q.  1071,  Mr.  R.  R.  Jackson,  Chair- 
man National  Telephone  Company;  q.  915,  Mr.  C.  Moseley,  Chair- 
man Lancashire  and  Cheshire  Telephonic  Exchange  Company, 
Limited;  and  q.  2775,  Mr.  W.  H.  Preece,  Electrician  to  Post  Office. 

-  American  Bell  Telephone  Company ;  Statistics  of  Exchanges, 
1885  and  1886. 


ir,  riTF.   TELEPHONE    IN    GREAT    BRITAIN 

people.  The  total  population  of  those  cities  was 
12,936.110.  In  England  and  Wales,  there  were,  in 
188 1,  771  cities  with  a  population  of  3,000  people,  and 
more  than  3,000  people.  The  total  population  of  those 
cities  was  17,285,026. 

On  June  13,  1884.  The  Times  wrote:  "The  action  of 
the  Post  Office  has  been  so  directed  as  to  throw  every 
possible  difficulty  in  the  way  of  the  development  of  the 
telephone  and  of  its  constant  employment  by  the  public. 
We  say,  advisedly,  every  possible  difficulty,  because  the 
regulations  under  which  licenses  have  been  granted  to 
the  telephone  companies  are,  in  many  respects,  as  com- 
pletely prohibitory  as  an  absolute  refusal  of  them.  ...  It 
appears  that  the  telephones  can  only  be  used  under  re- 
strictions which  are  as  absurd  as  they  are  vexatious.  .  .  . 
The  conduct  of  the  office,  although  not  legally  dishonest, 
is,  at  least,  morally  indefensible.  There  can  be  no  just 
ground  for  a  claim  to  possess  the  telephone,  by  virtue 
of  words  introduced  into  an  Act  of  Parliament  before 
the  telephone  was  thought  of;  and  the  effects  of  this 
claim  are  nearly  as  disastrous  to  the  country  as  to  the 
inventors  and  owners  of  the  instruments."^  The  Times 
voiced  a  sentiment  which  made  itself  felt  so  strongly 
Restrictive  '"  ^^^  House  of  Commons  in  the  fall  of 

Measures  1 884  in  the  debate  upon  the  Vote  of 

Relaxed  Supply  to  the  Post  Office,  that  the  Gov- 

ernment was  obliged  to  relax  the  restrictions  upon  the 

'Lord  Avebury:     On  Municipal  and  National  Trading,  p.  109. 


TELEPHONE  LICENSES   OF   1881   AND   1887         17 

use  of  the  telephone.  Mr.  Fawcett,  Postmaster  General, 
announced  the  change  of  policy  in  these  words: 
"Throughout  we  have  been  most  anxious  that  the  public 
should  enjoy  all  the  possible  facilities,  with  regard  to 
telephonic  communication,  which  are  compatible  with 
due  regard  to  the  interests  of  the  Revenue  [derived  from 
the  State  Telegraphs].  ...  I  at  once  proceed  to  state 
how  we  think  that  these  facilities  could  be  given,  so 
that,  on  the  one  hand,  the  public  may  have  these  facili- 
ties with  regard  to  telephonic  communication,  which 
they  have  a  right  to  demand  ;  Avhilst,  on  the  other  hand, 
the  Revenue  [from  the  State  Telegraphs]  is  properly 
protected.  .  .  .  "^  Mr.  Fawcett  then  stated  that  he 
would  "not  for  one  moment"  entertain  the  request  of 
the  United  Telephone  Company  for  a  monopoly 
in  those  areas  which  the  Company  served.  Therefore 
he  must  also  reject  the  proposal  made  by  the  Company 
"that  in  their  respective  areas  they  be  allowed  to  carry 
on  their  business  in  any  manner  they  might  think  fit, 
and  that,  in  place  of  the  10  per  cent,  royalty,  the  Com- 
pany would  undertake  to  make  good  to  the  Post  Office 
Department  any  loss  which  the  local  telegraph  revenue 
might  suffer  from  the  development  of  telephonic  com- 
munication within  such  district."  For  that  purpose  the 
Company  had  proposed  to  take  the  normal  growth  of 
the  telegraph  revenue  in  the  past  three  years  as  the  basis 
of  calculation.  Mr.  Fawcett  concluded  with  the  an- 
nouncement of  the  Government's  new  policy,  which  was 

^Hansard's  Parliamentary  Debates;    August  7,  1884,  p.   126. 
2 


18  THE   TELEPHONE    IN    GREAT    BRITAIN 

as  follows :  The  Post  Office  reserved  the  right  to  com- 
pete with  the  United  Telephone  Company  in  any  estab- 
lished area,  either  in  its  own  person,  or  by  granting 
licenses  to  other  companies.  All  limitations  on  areas 
were  to  be  removed,  and  permission  to  erect  trunk  wires 
was  to  be  given  to  all  licensees.  Companies  were  to  be 
permitted  to  open  public  pay  stations,  but  they  were  not 
"to  receive  or  deliver  a  written  message  at  any  point."  . . 
"It  w'ould  make,  I  am  afraid,  a  serious  hole  in  the  tele- 
graph revenue  if  written  messages  were  allowed  to  be 
sent,"  said  Mr.  Fawcett.  The  royalty  of  lo  per  cent, 
on  the  gross  receipts  was  retained ;  and  the  Post  Office 
continued  to  be  under  no  obligation  to  provide  way- 
leaves.  Finally,  all  outstanding  licenses  were  to  be  re- 
placed by  new  ones.  The  latter,  as  well  as  all  licenses 
to  be  issued  in  the  future,  were  to  terminate  on  Decem- 
'ber  31,  191 1,  unless  the  Government  should  avail  itself 
of  the  option  to  purchase  the  licensee's  plant  in  1890, 
1897  or  1904.  If  the  Government  should  avail  itself  of 
the  option  to  purchase  at  any  of  the  aforementioned 
dates,  the  price  should  be  determined  by  arbitration.  If 
the  Government  should  not  avail  itself  of  that  option, 
then  the  licensee's  rights  would  simply  expire,  nothing 
being  said  on  the  question  of  what  was  to  become  of  the 
licensee's  plant  in  191 1.* 

The  new  policy  went  into  effect  in  October,  1884.    At 
that  time,  the  telephone  had  penetrated  to  about  seventy- 

^  Report  from  the  Select  Committee  on  the  Telegraphs  Bill,  1892; 
q.  10  to  19,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office. 


TELEPHONE  LICENSES   OF   1881   AND   1887         19 

five  separate  towns,  with  their  adjoining  villages.  By 
1892,  when  the  Government  compelled  the  National 
Telephone  Company  to  sell  the  trunk  wires  erected  sub- 
sequently to  October,  1884,  the  telephone  had  penetrated 
to  about  400  towns  and  cities.^ 

Before  leaving  this  subject  of  the  licenses  of  1881  and 
1884,  a  word  must  be  said  upon  the  attitude  of  the 
Government  toward  the  Post  OfBce  Telephone  Ex- 
change system.  As  soon  as  the  Post  Office  had  insti- 
tuted legal  proceedings  against  the  Edi- 
Government 
opposed  to  son  Company,  it  applied  to  the  Treasury 

"rate-aided"  for   permission   to   establish   telephone 

Competition  ,  ,  ,    .,  ^, 

exchange    systems    of    its   own.       llie 

Treasury  consented  "on  the  understanding  that  its  ob- 
ject is  by  the  establishment  of  a  telephonic  system  to  a 
limited  extent  by  the  Post  Office  to  enable  your  depart- 
ment to  negotiate  with  the  telephone  companies  in  a 
satisfactory  manner  for  licenses."  On  that  understand- 
ing the  Post  Office  established  a  number  of  telephone 
exchange  systems.  In  June,  1883,  however,  the  Post 
Office  asked  the  Treasury  for  permission  to  engage  in 
active  competition  with  the  telephone  companies.  The 
Treasury  replied  :  "In  reply  to  these  [your]  arguments, 
my  Lords  [of  the  Treasury]  have  to  observe  that  they 
find  no  evidence  that  the  extension  of  the  business  is 
necessary  in  order  to  maintain  the  profit  on  the  capital 

^Report  from  the  Select  Committee  on  the  Telegraphs  Bill,  1892; 
<!•  365,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company. 


20  THE   TELEPHONE    IN    GREAT    BRITAIN 

already  sunk  in  it.  It  is  new  profit,  therefore,  not  the 
maintenance  of  the  old.  which  has  to  be  weighed  against 
the  general  objection  to  the  appearance  of  the  State  as 
a  competitor  in  trade.  The  sound  principle,  in  the 
opinion  of  my  Lords,  is  chat  the  State,  as  regards  all 
functions  which  are  not  by  their  nature  exclusively  its 
own,  should  at  most  be  ready  to  supplement,  not  en- 
deavor to  supersede  private  enterprise,  and  that  a  rough, 
but  not  inaccurate,  test  of  th«.  legitimacy  of  its  procedure 
is  not  to  act  in  anticipation  of  possible  demand.  My 
Lords  do  not  propose  to  push  this  doctrine  so  far  as  to 
exclude  declarations  in  Parliament,  the  affixing  of 
notices  in  post  offices,  and  such  like  means  of  showing 
what  business  you  are  ready  to  undertake;  but  they 
object  to  anything  in  the  nature  of  solicitation,  and 
above  all  of  personal  solicitation.  For  these  reasons 
they  are  not  prepared  to  approve  of  the  appointment  of 
travelling  clerks  [canvassers].  For  all  these  reasons, 
my  Lords  do  not  wish  you  to  do  more,  in  respect  of 
exchanges  and  private  wires,  than  to  bring  your  offers 
[of  telephone  service]  fairly  within  the  knowledge  of 
the  public,  and  to  wait  for  their  demands  upon  you."^ 
The  Treasury  did  not  confine  itself  to  prohibiting 
canvassing  for  business.  It  also  refused  to  allow  the 
Post  Office  to  install  a  telephone  exchange  system 
unless  the  Post  Office  could  show  that  the  system  was 
likely  to  be  profitable,  that  is,  to  pay  3.5  per  cent,  in- 

^  Report  from  the  Select  Committee  on  Telephones,  1898;  q. 
1105  to  mo,  800  and  887,  Mr.  J.  C.  Lamb,  Second  Secretary  to 
Post  Office. 


TELEPHONE  LICENSES  OF  1881  AND  1887         21 

terest  on  the  investment,  as  well  as  annual  sinking  fund 

payments  which  would  repay  in  fifteen  years  the  capital 

invested.^      This  latter  policy  the   Treasury  enforced 

M         ,•  as  a  precaution  aerainst  the  repetition 

rrecautwnary  1  &  r 

Measures  against  of  the  parliamentary  pressure  and  log- 
' Log-rolhng'  rolling  which  had  set  in  immediately 
after  the  State  had  nationalized  the  telegraphs  in  1870, 
and  had  undertaken  to  fill  the  gaps  in  the  telegraph  net 
which  the  private  companies  had  built  up.  Four  years 
of  that  pressure  and  log-rolling  had  compelled  the  Gov- 
ernment to  refuse  to  build  further  telegraph  lines  of 
uncertain  financial  outcome,  unless  the  inhabitants  of 
the  districts  to  be  served  by  such  lines  should  guarantee 
that  the  lines  would  pay  interest  on  the  capital  invested, 
as  well  as  sinking  fund  payments  which  would  repay 
in  seven  years  the  capital  invested,  and,  finally,  would 
leave  a  margin  for  certain  contingencies.  Sir  Stafford 
Northcote,  Chancellor  of  the  Exchequer,  in  1875,  in  the 
course  of  an  allusion  to  that  parliamentary  pressure  and 
log-rolling,  said  that  the  Government  could  not  exercise 
the  discretion  which  the  telegraph  companies  had  ex- 
ercised, but  must  seek  protection  against  unjustifiable 
demands  for  telegraph  services  in  the  policy  of  local 
guarantees.  He  added  the  significant  words  :  "This  is 
a  point  worthy  of  consideration,  not  so  much  in  regard 
to  the  Telegraph  Service  itself,  in  which  we  are  now 

''■Report  from  the  Select  Committee  on  Telephones,  1898;  q.  4818 
to  4832,  and  S511  to  5513,  5315,  and  5065  to  5070,  Mr.  W.  H.  Preece, 
Engineer-in-Chief  to  Post  Office;  and  Hansard's  Parliamentary  De- 
hates;  June  21,  1906,  p.  392,  ATr.  Sydney  Buxton,  Postmaster  General. 


22  THE  TELEPHONE   IN    GREAT   BRITAIN 

fairly  embarked,  and  of  which  we  must  make  the  best 
we  can,  as  in  reference  to  suggestions  of  acquisitions 
of  other  forms  of  property,  and  the  conduct  of  other 
kinds  of  business,  in  w'hich  I  hope  the  House  will  never 
be  led  to  embark  without  very  carefully  weighing  the 
results  of  this  remarkable  experiment."^ 

Upon  this  question  of  pressure  exercised  by  Parlia- 
ment and  the  public,  Mr.  Scudamore,  Assistant  Secre- 
tary of  the  Post  Office  and  official  head  of  the  State 
Telegraphs,  had  testified  as  follows,  in  1873 :  "I  have 
only  too  lively  a  recollection  of  the  pressure  put  on  the 
Department  at  and  for  a  long  time  after  the  transfer 
[of  the  telegraphs  to  the  State],  a  pressure  which  I 
alone  had  to  bear,  and  w'hich  has  left  traces  on  me  never 
to  be  effaced,  a  pressure  w'hich  no  consideration  would 
induce  me  to  encounter  again.  At  the  transfer,  and  for 
long  afterwards,  nay,  even  up  to  the  present  time,  what 
has  been  the  public  cry?  Has  it  not  been  continually, 
'Give  us  more  wires  on  existing  lines?  Give  us  ex- 
tensions of  wires  to  outlying  places.  Bring  the  offices 
of  transmission  and  delivery  closer  to  our  doors.  Bind 
together  not  merely  the  villages  and  hamlets  of  the  main 
land,  but  the  little  islands  which  fringe  the  northern 
coasts.  Give  us  a  more  rapid  new^s  service,  so  that  all 
parts  of  the  United  Kingdom  may  be  simultaneously 
informed  of  all  that  it  imports  the  Kingdom  to  know. 
In  short,  do  all  you  can  to  quicken,  to  improve,  to  ex- 
tend telegraphic  communication.'    This  has  been,  this  is 

^Hansard's  Parliamentary  Debates;  April   15,   1875,  p.   1025. 


i 


TELEPHONE  LICENSES   OF  1881  AND  1887         23 

still  the  public  cry.  There  is  scarcely  a  Chamber  of 
Commerce  or  a  Town  Council  in  the  Kingdom  that  has 
not  urged  it  again  and  again.  There  is  hardly  a  news- 
paper, from  one  end  of  the  land  to  the  other,  that  has 
not  in  turn  chided  the  [Post  Office]  Department  for  not 
progressing.  There  is  hardly  a  Member  of  Parliament 
that  has  not  supported  the  prayer  of  his  constituents."^ 

Upon  the  same  occasion,  Mr.  Monsell,  Postmaster 
General,  was  asked :  "  .  .  .  .  Are  you  in  a  position  to 
state  to  us  that  the  Post  Office  has  been  beset  constantly, 
I  may  say  daily,  by  applications  from  all  parts  of  the 
country  for  those  extensions?"  He  answered:  "That 
is  putting  it  in  rather  a  strong  way,  but  I  know  that  the 
applications  received  have  been  very  numerous,  and  the 
pressure  was  very  great.  I  would  rather  say  *was' 
than  'is,'  because  we  have  nearly  done  the  work  now."^ 

At  the  time  of  the  offering  of  the  foregoing  testi- 
mony, Mr.  Scudamore,  who  had  been  given  a  perfectly 
free  hand  in  reorganizing  and  extending  the  telegraph 
system  purchased  in  1870,  had  spent  about  $4,500,000 
more  than  Parliament  had  put  at  the  disposal  of  the 
Post  Office.  For  the  purchase,  reorganization  and  ex- 
tension of  the  telegraphs,  Parliament,  upon  the  advice 
of  Mr.  Scudamore,  had  appropriated  $35,000,000  in 
1869,  and  another  $5,000,000  in  1871.^ 

^Second  Report  from  the  Committee  on  Public  Accounts,  1873; 
Appendix  No.    i,  pp.    iii    and   147. 

"Second  Report  from  the  Committee  on  Public  Accounts,  1873; 
q.  2001. 

^Second  Report  from  the  Committee  on  Public  Accounts,  1873; 
q.  2069,  Mr.  Lowe,  Chancellor  of  the  Exchequer ;  and  Appendix 
No.  I,  p.  95. 


24  THE  TELEPHONE   IN    GREAT   BRITAIN 

The  development  of  parliamentary  pressure  and  log- 
rolling in  connection  with  the  building  of  telegraph 
lines  had  not  been  the  only  direction  in  which  the  ex- 
periment of  State  telegraphs  had  disappointed  some  of 

D  ,  the    more    thoughtful   of   the   English 

Frcssure  from  °  ° 

Telegraph  statesmen.      In    1881,  Lord   Frederick 

Clerks  Cavendish,  Financial  Secretary  to  the 

Treasury,  expressed  himself  as  follows  in  the  House  of 
Commons  :  "With  respect  to  the  telegraph  clerks,  since 
they  have  received  the  franchise,  they  had  used  it  to 
apply  pressure  to  Members  of  Parliament  for  the 
furtherance  of  their  own  objects.  ...  If,  instead  of 
the  Executive  being  responsible  [for  the  conduct  of  the 
State  Telegraphs] ,  Members  of  the  House  were  to  con- 
duct the  administration  of  the  Departments,  there  would 
be  an  end  of  all  responsibility  whatever.  In  the  same 
way,  if  the  Treasury  was  not  to  have  control  over  ex- 
penditure, and  Members  of  the  House  were  to  become 
promoters  of  it,  the  system  [of  administering  the  na- 
tional finances]  which  had  worked  so  admirably  in  the 
past  would  be  at  an  end.  ,  .  .  With  regard  to  the  position 
of  the  telegraphists  in  the  Government  service  as  com- 
pared with  their  former  position  under  private  Com- 
panies, what  had  taken  place  [since  the  nationalization 
of  the  telegraph  service]  would  be  a  warning  to  the 
Government  to  be  careful  against  unduly  extending  the 
sphere  of  their  operations  by  entering  every  day  upon 
some  new  field,  and  placing  themselves  at  a  disadvan- 
tage by  undertaking  the  work  of  private  persons."  ...  * 

'^Hansard's  Parliamentary  Debates;  August  i6,  1881,  p.  141. 


TELEPHONE  LICENSES  OF  1881  AND  1887         25 

The  foregoing  expressions  of  disappointment  with 
the  every-day  working  of  the  poHcy  of  extending  the 
activity  of  the  State  to  the  conduct  of  great  commercial 
enterprises  employing  tens  of  thousands  of  persons  and 
affecting  the  pocket-book  interests  of  many  classes  of 
rpj^^  ^^  ^  society  and  of  innumerable  localities  and 

Telegraphs  regions,    came    from    respectively    the 

a  Warning  Chancellor  of   the   Exchequer   in   Mr. 

Disraeli's  Ministry  of  1874  to  1880,  and  the  Financial 
Secretary  of  the  Treasury  in  Mr.  Gladstone's  Ministry 
of  1880  to  1885.  The  disillusionment  which  those 
statements  expressed  was  shared  by  more  than  one  of 
the  leaders  of  the  two  leading  political  parties ;  and  that 
disillusionment  undoubtedly  was  a  considerable  factor 
in  the  considerations  which  led  the  Disraeli  Ministry 
as  well  as  the  Gladstone  Ministry  to  refuse  to  take  up 
the  telephone  business. 

The  policy  of  abstention  from  active  competition 
with  the  telephone  companies,  the  Treasury  rhaintained 
until  June,  1898.  Of  course  the  Treasury  Letters  and 
the  Treasury  Minute  here  quoted  were  not  made  known 
to  the  public  until  after  the  policy  of  abstention  from 
■competition  had  been  abandoned.  Nor,  finally,  was  the 
foregoing  policy  in  any  way  inconsistent  with  the  state- 
ments made  from  time  to  time  by  the  Government  of 
the  day  that  the  Post  Office,  if  necessary,  would  correct 
by  means  of  Post  Office  competition  any  evils  that 
might  arise  through  the  telephone  companies  abusing 


26  THE   TELEPHONE    IN    GREAT   BRITAIN 

their  powers  or  neglecting  their  opportunities.  Upon 
this  point,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post 
Office,  testified  as  follows  in  1895 :  "I  think  there  is  a 
wide  difference  between  competition  and  the  possibility 
of  it.  I  think  we  have  proved  by  actual  experience  that 
the  possibility  of  competition  has  produced  certain  good 
results,  and,  if  it  were  necessary,  that  possibiHty,  I 
think,  would  produce  good  results  again."* 

In  the  years  1881  to  1898,  the  Post  Office  installed 
49  telephone  systems.  At  the  close  of  1898,  the  New- 
castle-on-Tyne  Exchange  had  565  subscribers;  the 
Cardiff  Exchange  had  162  subscribers;  two  exchanges 
Morib  nd  St  ^^^  respectively  49  and  60  subscribers 
Telephone  each ;    four  exchanges  had  from  20  to 

Exchanges  ^5   subscribers  each ;    eight  exchanges 

had  from  10  to  19  subscribers  each;  twenty-four  ex- 
changes had  from  2  to  8  subscribers  each;  and  nine 
exchanges  had  no  subscribers.^ 

Mr.  R.  W.  Hanbury,  Financial  Secretary  to  the 
Treasury  from  1895  to  1900,  and  Representative  in  the 
Allegation  of  House  of  Commons  of  the  Postmaster 
Unfair  Com-  General,  the  Duke  of  Norfolk,  in  the 
pe  itton  course  of  his  repeated  onslaughts  upon 

the  National  Telephone  Company,  attributed  the 
failure  of  the   Post  Office  Telephone   Exchanges   to 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s  ;  q.  5279- 

'^  Parliamentary   Paper,   No.   201,    1899. 


TELEPHONE  LICENSES   OF  1881  AND   1887         27 

make  any  headway,  primarily  to  the  alleged  practice  of 
the  National  Telephone  Company  of  giving  special  and 
preferential  rates  in  those  areas  in  which  the  Company 
competed  with  the  Post  Office,  and  only  secondarily  to 
the  Treasury  restrictions.^  Before  the  Select  Com- 
mittee on  Telephones,  1898,  Mr.  J.  C.  Lamb,  Second 
Secretary  to  Post  Office,  and  Mr.  W.  H.  Preece,  Engi- 
neer-in-Chief  to  Post  Office,  made  some  statements 
which  upon  a  hasty  reading  might  seem  to  support  Mr. 
Hanbury's  statement.  But  upon  careful  reading  those 
statements  leave  one  in  doubt  as  to  the  opinions  of 
Messrs.  Lamb  and  Preece.  The  latter  witness  asserted 
that  the  Post  Office  could  hold  its  own  against  the  Na- 
tional Telephone  Company  if  the  Treasury  would  but 
give  the  Post  Office  a  "free  hand,"  that  is,  the  power  to 
employ  all  ordinary  commercial  methods  and  practices, 
excepting  the  power  to  show  preference  and  favor.^ 
Moreover,  the  statements  of  Messrs.  Lamb  and  Preece 
as  to  the  exercise  of  favor  and  preference  by  the  tele- 
phone companies  seem  to  apply,  not  to  the  National 
Telephone  Company,  but  to  the  companies  which  were 
absorbed  by  the  National  Company  in  the  latter  part  of 
the  decade  from  1881  to  1890.  No  evidence  seems  to 
have  been  presented  to  the  effect  that  the  National 
Telephone  Company,  which  acquired  a  practical  mo- 


^ Hansard's  Parliamentary  Debates;  April  i,  1898,  p.  1728;  and 
March  6,  1899. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  807 
to  809,  Mr.  J.  C.  Lamb;  and  q.  4816  and  following,  5277  and  follow- 
ing, and  5316  to  5319.  Mr.   W.  H.  Preece. 


28  THE  TELEPHONE   IN    GREAT   BRITAIN 

nopoly  in  1890,  made  a  practice  of  fighting  the  Post 
Office  Telephone  Exchanges  by  showing  preference  and 
favor,  though  local  agents  may  from  time  to  time  have 
shown  preference  and  favor  without  having  been  au- 
thorized so  to  do.  Finally,  after  Mr.  Hanbury  had 
gained  what  he  wanted  to  gain  by  his  onslaughts  upon 
the  National  Telephone  Company,  he  himself  admitted 
that  the  National  Telephone  Company  never  had  made 
a  practice  of  giving  preferential  rates.^ 

The  Government  declined  to  purchase  the  telephone 
patents,  largely  because  of  the  unsatisfactory  working 
of  the  experiment  of  the  nationalization  of  the  tele- 
graphs. It  immediately  sought  to  pro- 
tect  its  telegraph  revenue  by  restricting 
the  development  of  the  telephone.  In  1884,  public 
opinion  compelled  the  Government  to  relax  somewhat 
its  restrictive  measures ;  but  it  did  not  compel  the  Gov- 
ernment to  give  the  telephone  free  scope.  In  the  subse- 
quent years  public  opinion  became  more  and  more  con- 
fused by  the  issues  raised  successively  by  the  telephone 
amalgamations  of  1889-90,  the  Duke  of  Marlborough, 
the  Association  of  Municipal  Corporations  and  Mr.  R. 
W.  Hanbury,  Financial  Secretary  to  the  Treasury  in 
1895  to  1900.  The  result  was  that  the  persons  who 
undertook  to  popularize  the  telephone  were  never 
given  a  fair  chance.    The  enterprise  which  those  persons 

^Hansard's  Parliamentary  Debates;  June  26,  1899,  p.  694,  Mr. 
Hanbury  and  Sir  James  Fergusson ;  compare  also,  March  6,  1899, 
p.  1396,  Sir  James  Fergusson. 


TELEPHONE  LICENSES   OF  1881  AND   1887         29 

were  read}'^  to  bring  to  their  task  is  indicated  in  their 
willingness  to  invest  millions  of  dollars  in  a  house-top 
to  house-top  plant,  under  a  charter  which  expired  with 
the  lapse  of  31  years,  with  no  provision  either  for  its 
renewal  or  for  the  sale  of  the  plant  and  established  busi- 
ness. It  is  further  indicated  in  the  proposal  of  the  Lan- 
cashire and  Cheshire  Company  to  install  a  free  long- 
distance service,  as  well  as  local  pay  stations  on  the  basis 
of  two  cents  per  conversation. 


CHAPTER  III 

THE  AMALGAMATIONS  OF  1889-90 

The  United  Telephone  Company,  owner  of  the  master  patents, 
establishes  subsidiary  companies  for  the  several  parts  of  the 
United  Kingdom.  Those  companies  subsequently  are  consolidated 
into  the  National  Telephone  Company.  The  consolidation  re- 
sults in  the  issue  of  $15,525,000  of  securities,  which  represent  a 
cash  outlay  of  $9,065,000.  The  injection  of  $6,460,000  of  "water" 
is  not  a  stock  market  operation,  so-called,  but  a  necessary  inci- 
dent in  the  upbuilding  of  a  new  industry.  At  the  time  of  the 
consolidation  the  profits  yielded  by  the  telephone  business  were 
high ;  but  since  then  they  have  averaged  about  eight  per  cent, 
upon  the  capital  actually  invested.  The  "water"  injected  in  1889 
to  1890  is  eliminated  by  1903,  through  the  practice  of  expending 
upon  plant  undistributed  net  earnings. 

The  United  Telephone  Company,  which,  in  1880, 
acquired  the  patent  rights  of  Messrs.  Bell  and  Edison, 
confined  its  operations  to  the  so-called  Metropolitan 
London  telephone  area.  It  supplied  telephone  instru- 
ments to  a  number  of  companies  organized  for  the  pur- 
pose of  serving  certain  specified  portions  of  the  United 
Kingdom.  In  most  of  those  companies,  if  not  in  all  of 
them,  the  stockholders  of  the  United  Telephone  Com- 
pany retained  a  controlling  interest.^  The  leading  so- 
called  provincial  companies  were  the  National  Tele- 

^  Report  from  the  Select  Committee  on  Telephone  and  Tele- 
graph Wires,  1885  ;  q.  1040,  Mr.  C.  Moseley,  Chairman  Lancashire 

30 


THE  AiMALGAMATIONS  OF  1889-90  31 

phone  Company  and  the  Lancashire  and  Cheshire 
Company.  The  National  operated  in  the  Midlands, 
tiie  north  of  England,  the  whole  of  Scotland,  and  the 
north  of  Ireland.  The  Lancashire  and  Cheshire  oper- 
ated in  Lancashire,  Cheshire  and  the  surrounding  dis- 
tricts. After  the  removal,  in  1884,  of  the  prohibition 
against  interurban  trunk  lines,  the  several  local  ex- 
changes of  these  three  companies  were  very  largely 
connected  by  means  of  trunk  lines.  It  then  became  ap- 
parent that  ultimate  success  in  developing  the  telephone 
industry  was  to  be  achieved  only  by  means  of  uniform- 
ity of  system,  similarity  of  method,  concentration  of 
administration,  and  complete  intercommunication  by 
means  of  trunk  lines.  The  outcome  of  that  convic- 
tion was  the  amalgamation,  in  May,  1889,  of  the  three 
companies  in  question  into  the  National  Telephone 
Company.  The  latter  company  shortly  afterward  ab- 
sorbed the  ten  remaining  smaller  subsidiary  companies 
which  were  operating  in  the  remaining  parts  of  the 
United  Kingdom.  It  will  be  noted  that  the  consoli- 
dated companies  had  not  been  in  competition  with  each 
other ;  the  consolidations  of  competing  companies  hav- 
ing been  effected  previous  to  1889. 

The  consolidations  of  1889-90  were,  however,  not 
prompted  solely  by  the  desire  to  secure  greater  efficiency 
and  economy.  They  were  prompted  in  part  by  the 
belief  that  the   existence  of  one   large   company  ex- 

and  Cheshire  Telephonic  Exchange  Company,  Ltd.,  and  q.  364  and 
372,  Mr.  J.  B.  Morgan,  Managing  Director  United  Telephone 
Company. 


32  THE   TELEPHONE    IN    GREAT    BRITAIN 

tending  over  the  whole  United  Kingdom  would  tend 

to  discourage  the  formation  of  competing  local  com- 

Motivcs  for  panics    when    such    formation    should 

Consolidation         become    possible    after    the    expiry    of 

the  telephone  patents  in  1890  and  1891  respectively.^ 

It  was  believed  also  that  a  united  company  would  be 

able  to  obtain  better  terms  from  the  Government  than 

would   a   number   of   separate  companies,   should   the 

Government,  in  1890,  exercise  its  right  to  purchase  the 

properties  of  the  telephone  licensees.^ 

The  fusion  of  the  three  large  companies  was  effected 

on   the  basis  of  the  market  values  of  the  respective 

companies'  shares;  and  the  ten  smaller 
Forty-two  per  .  1        i_    j  •     -i 

cent  of  "W  t  r"    companies  were  absorbed  on  a  similar 

basis  of  valuation.  The  shares  of  the 
National  Telephone  Company  were  taken  at  par ;  those 
of  the  Lancashire  and  Cheshire  Company  at  131.25; 
and  those  of  the  United  Telephone  Company  at  250.^ 
The  outcome  was  the  capitalization  of  the  resulting 
National  Telephone  Company  at  $15,525,000;  to  repre- 
sent a  cash  expenditure  of  $9,065,000;  in  other  words, 
the  injection  of  $6,460,000  of  "water."* 

When  the  several  telephone  companies  were  launched, 
their  credit  was  so  poor  that  it  was  necessary  to  issue 

'^The  Times;  June  5,  1889,  Mr.  J.  S.  Forbes,  Deputy  Chairman 
United  Telephone  Company. 

^  7/i<?  Times;  June  5,  1889,  Mr.  James  Brand,  Chairman  United 
Telephone   Company. 

^The  Economist ;    May  25,  1889. 

*  Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s  ;  q.  4783  to  4789,  Mr.  J.  S.  Forbes,  Chairman  National  Tele- 
phone Company. 


THE  AMALGAMATIONS  OF  1889-90  33 

their  securities  at  a  disccnint.  The  alternative  would 
have  been  the  unbusinesslike  practice  of  issuing  securi- 
ties promising  an  unduly  high  rate  of  interest.  The 
several  companies  therefore  had  begun  business  with 
a  capitalization  in  excess  of  the  cash  actually  raised 
and  invested  in  plant  and  patent  rights.  And  the  dif- 
ference between  the  face  value  of  the  securities  sold, 
and  the  cash  obtained,  had  represented  the  cost  of  ob- 
taining money  for  investment  in  an  industry  that  was 
untried,  and,  therefore,  of  uncertain  financial  outcome. 
That  cost  of  obtaining  money  had  been  as  much  and  as 
necessarily  a  part  of  the  cost  of  the  resulting  telephone 
plant,  as  had  been  the  cost  of  the  poles,  wire,  instru- 
ments and  labor  put  into  the  plant. 

After  experience  had  shown  that  the  telephone  in- 
dustry was  profitable,  the  securities  which  had  been 
issued  at  a  discount  rose  to  a  premium ;  and  the  dififer- 
ence  between  that  discount  and  premium  was  the  reward 
reaped  by  the  persons  who  had  had  the  courage  to 
risk  their  money  in  an  untried  industry,  as  well  as  the 
commercial  ability  to  bring  that  industry  to  the  stage 
of  an  industry  "ready  made."  To  have  refused  to 
recognize  that  increase  in  values,  would  have  been  to 
deny  to  the  investors  in  an  untried  and  undeveloped 
industry  the  reward  due  to  them  by  reason  of  their 
courage  and  ability.  Such  denial  would  have  been 
against  the  public  interest,  for  it  would  have  discour- 
aged the  spirit  of  adventure,  one  of  the  most  priceless 
qualities  that  a  nation  can  possess.  In  short,  the 
3 


34  THE  TELEPHONE   IN   GREAT   BRITAIN 

$6,460,000  of  "water"  injected  into  the  capital  of  the 
National  Telephone  Company  in  1889-90,  represented 
the  reward  of  the  persons  who  had  assumed  the 
Legitimate  ^'sk  inherent  in  every  effort  to  develop 

Stock-watering  an  invention  from  the  stage  of  a  me- 
chanical device  of  proven  success  in  a  laboratory,  into 
an  instrument  of  proven  success  and  actual  usefulness 
in  the  work-a-day  world  of  industry  and  commerce. 
Again,  it  represented  the  reward  of  persons  who  had 
undertaken  a  task  which  the  Government  had  declined 
to  undertake,  largely  because  experience  gained  under 
the  experiment  of  the  nationalization  of  the  telegraphs 
had  taught  the  Government  that  it  was  too  weak  to 
protect  the  national  treasury  against  the  illegitimate 
demands  made  by  every  class  and  section  of  the  public 
whom  the  practice  of  public  ownership  had  brought 
into  commercial  relations  with  the  State.^ 

In  April,  1890,  when  the  foregoing  amalgamations 
were  completed,  the  National  Telephone  Company  had 
invested  in  its  plant  an  accumulated  surplus  of  $267,- 
500,  which  was  not  represented  by  outstanding  securi- 
ties. That  surplus  was  increased  each  year;^  and  by 
June  30,  1906,  it  had  become  $10,330,000.^  Early  in 
1903,  it  had  become  sufficiently  large  to  neutralize 
the  "water"  injected  in  1889-90.  namely  $6,460,000. 

'  Compare    H.    R.    Meyer :     The   British   State   Telegraphs. 
'Report  from   the   Select   Committee  on  Post   Office   (Telephone 
Agreement),   1905  ;  p.  236. 

^  The  Electrical  Review;    July  27,   1906. 


THE  AMALGAMATIONS  OF  1889-90  35 

At  the  time  of  the  amalgamation  of  1889-90,  and 

previous  thereto,    the  profits   made  by  the  telephone 

companies  were  large.     For  example,  in  the  four  years, 

1886  to  1889,  the  United  Telephone 
Earnings  upon        ^  >     j-    •  1       1  ^-     ^ 

Cash  Investment    Company  s  dividends  were  respectively 

13^  i3>  15  ^"<^  17-5  P^""  cent.^  Again, 
in  the  year  1889-90,  the  net  revenue  of  the  National 
Telephone  Company  available  for  interest,  dividends, 
reserve  fund  and  depreciation  fund,  was  equivalent  to 
14.8  per  cent,  upon  the  actual  cash  investment.  But 
in  the  subsequent  years  the  profits  declined  rapidly.  In 
the  period  from  1892  to  1897,  the  net  revenue  in  ques- 
tion ranged  between  7.89  per  cent,  and  9.18  per  cent, 
upon  the  actual  cash  investment;  and  it  averaged  8.66 
per  cent.  In  the  years  1898  to  1904,  it  ranged  be- 
tween 7.20  per  cent,  and  8.08  per  cent. ;  and  it  averaged 
7.98  per  cent.^ 

There  were  two  reasons  for  the  decline  in  profits  after 
1890.  In  the  first  place,  the  monopoly  which  the  Na- 
tional Telephone  Company  had  held  as  possesser  of  the 
Bell  and  Edison  patents,  came  to  an  end  with  the  ex- 
piry of  those  patents  in  1890  and  1891.  It  therefore 
became  advisable  to  reduce  the  charges  for  telephone 
service  in  order  to  diminish  the  temptation  to  outside 
capital  to  go  into  the  telephone  business  after  the  expiry 
of  the  patent  rights.  Accordingly,  in  January,  1891, 
a  general  reduction  of  rates  outside  of  Metropolitan 

^  The  Economist;    July  20,   1899. 

"Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  p.  236  and  248  to  250. 


36  THE   TELEPHONE    IN   GREAT    BRITAIN 

London  was  made,  from  $75  and  $60  a  year  for  un- 
limited service,  to  $50.  Those  reductions  involved 
the  National  Telephone  Company  in  an  immediate  re- 
duction of  revenue  of  $275,000  a  year/  which  sum  was 
equal  to  12.7  per  cent,  of  the  gross  revenue  of  1891. 
Of  still  greater  effect  in  reducing  profits,  was  the  fact 
that  the  progress  of  invention  and  the  restrictions 
which  the  Post  Office  and  the  Municipalities  had  placed 
upon  the  telephone  companies,  made  it  necessary  to  re- 
construct, in  the  period  beginning  with  the  year  1892, 
practically  the  whole  plant  that  had  been  installed  in 
the  period  ending  with  1892,  as  well  as  considerable 
part  of  the  plant  erected  in  the  years  1893  to  1897. 
The  whole  cost  of  replacing  that  plant,  which  in  part 
was  obsolete,  in  part  had  been  erected  on  false  princi- 
ples in  consequence  of  the  attitude  taken  by  the  Post 
Office  and  the  Municipalities,  the  National  Telephone 
Company  charged  to  operating  expenses.^ 

It  must  be  added  that  the  United  Telephone  Com- 
pany, in  the  last  four  years  of  its  separate  existence, 
when  it  was  paying  dividends  which  averaged  14.5  per 
cent.,  was  giving  poor  service  because  it  was  adhering 
to  the  earth-return  circuit,  which  began  to  be  displaced 
in  the  United  States,  in  large  cities,  in  1885.  Had  the 
United  Telephone  Company  in  1885  begun  the  replace- 

^The  Times;  January  20,  1899:  The  Case  of  the  National  Tele- 
phone Company,  by  a  Correspondent. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  537,  542,  1655,  1759  and  1760,  Mr.  W.  E.  L. 
Gaine,  General  Manager  National  Telephone  Company. 


THE  AMALGAMATIONS  OF  1889-90  37 

ment  of  its  antiquated  plant,  its  dividends  doubtless 
would  have  been  smaller  in  the  years  1886  to 
1889,  and  its  service  vi^ould  have  been  vastly  better. 
In  1884,  1885  and  1888,  the  United  Telephone  Com- 
pany asked  Parliament  for  rights  of  way  in  the  streets; 
and  had  those  rights  been  granted,  the  Company  would 
have  begun  the  replacement  of  its  earth-return  circuit 
wires  not  later  than  1887.  But  on  each  occasion  the 
Government  persuaded  Parliament  to  reject  without 
discussion  or  investigation  the  United  Telephone  Com- 
pany's application  for  way-leaves;  although,  in  1885, 
a  Select  Committee  reported  that  the  telephone  com- 
panies ought  to  have  such  rights  of  way  in  the  streets 
as  had  the  water,  gas,  street  railway  and  other  public 
service  companies. 

It  has  been  necessary  to  dwell  at  some  length  upon 
the  injection  of  $6,460,000  of  "water"  in  1889-90;  the 
subsequent  elimination  of  that  "water"  through  the  ac- 
cumulation of  a  reserve  fund  of  $10,- 

Summary  .  ,    ,  .       ,      ^        , 

330,000  mvested  m  plant  and  not  repre- 
sented by  outstanding  securities ;  the  profits  made  by 
the  National  Telephone  Company ;  and  the  main  factors 
that  determined  those  profits.  It  has  been  necessary 
to  put  those  facts  before  the  reader,  in  order  that  he 
may  judge  the  soundness  of  the  criticism  constantly 
passed  upon  the  National  Telephone  Company,  to  wit, 
that  it  has  kept  its  charges  unduly  high  in  order  that 
it  might  pay  dividends  upon  a  capital  consisting  very 
largely  of  "water." 


2;385';'6 


38  THE   TELEPHONE   IN   GREAT   BRITAIN 

In  conclusion,  the  writer  wishes  to  add  that  in  his 
opinion  there  can  be  no  question  as  to  the  propriety  of 
charging-  to  operating  expenses  the  cost  of  replacing 
plant  made  obsolete  by  the  progress  of  invention;  as 
well  as  the  cost  of  a  wrong  policy  forced  upon  a  trading 
company  by  the  desire  of  the  State  to  protect  its  tele- 
graphs from  competition,  as  well  as  by  the  play  of 
national  and  municipal  politics.  The  writer  desires 
also  to  add  that  in  his  opinion  a  return  of  8  per  cent, 
and  9  per  cent,  upon  capital  invested  in  a  new  industry 
which  is  exposed  not  only  to  the  risks  and  dangers 
inseparable  from  the  upbuilding  of  new  industries,  but 
also  to  the  risks  and  dangers  gratuitously  imported  by 
national  and  municipal  statesmen  influenced  partly  by 
self-seeking  and  partly  by  ignorance  of  the  telephone 
business  and  class  prejudice,  is  by  no  means  excessive. 


CHAPTER  IV 

THE  COMPULSORY   SALE  OF  THE  NATIONAL 

TELEPHONE    COMPANY'S    LONG 

DISTANCE  SERVICE 

The  growth  of  the  National  Telephone  Company  in  the  years 
1885  to  1892,  in  spite  of  the  lack  of  power  to  use  the  streets, 
thoroughly  alarmed  the  Government,  lest  the  telephone  should 
largely  replace  the  telegraph  for  the  purpose  of  intra-city  as  well 
as  inter-city  communication.  The  Post  Office  Telegraphs  were  in 
no  position  to  meet  the  competition  of  the  telephone,  because  of 
the  mismanagement  brought  about  by  the  intervention  of  the 
House  of  Commons.  On  the  other  hand,  the  public  demand  for 
a  better  as  well  as  a  more  extensive  telephone  service  made  it 
impossible  for  the  Government  to  continue  to  deny  the  National 
Telephone  Company  way-leaves.  Under  the  circumstances  the 
Government  resolved  to  give  the  National  Telephone  Company 
moderate  way-leaves ;  and  to  protect  the  Treasury's  interest  in  the 
State  Telegraphs  by  compelling  the  National  Telephone  Company 
to  sell  its  long-distance  telephone  plant  and  withdraw  from  the 
business  of  providing  inter-city  communication.  The  National 
Telephone  Company  under  compulsion  acceded  to  the  Govern- 
ment's proposal.  Dr.  Cameron,  M.  P.,  Glasgow,  moved  that  the 
Government  purchase  the  entire  business  of  the  National  Tele- 
phone Company,  local  as  well  as  long-distance;  but  the  House  of 
Commons  rejected  the  motion,  after  the  Government  had  pro- 
tested that  the  increase  in  the  State  employees  involved  in  Dr. 
Cameron's  proposal  would  constitute  a  grave  political  danger. 

In   1884,  when  the  Government  relaxed  somewhat 

the  measures  which  it  had  taken  for  the  purpose  of 

restricting  the  spread  of  the  telephone,  there  was  tele- 

39 


40  THE  TELEPHONE   IN  GREAT   BRITAIN 

phone  service  in  about  75  separate  cities  and  towns  of 
the  United  Kingdom;  and  there  were  about  12,000 
telephone  users.  By  1892,  the  National  Telephone 
Company  had  installed  service  in  about  400  cities  and 
towns;  and  had  acquired  54,600  subscribers.^  At  first 
blush  it  would  seem  that  satisfactory  progress  had  been 
made  in  the  period  from  1884  to  1892  ;  but  as  a  matter 
of  fact,  materially  greater  progress  would  have  been 
made,  had  the  Governmeiit,  in  1884,  withdrawn  all 
restrictions  which  had  been  imposed  solely  for  the  pur- 
pose of  protecting  the  telegraph  revenue;  and  had  it, 
in  addition,  given  the  National  Telephone  Company 
adequate  way-leaves.  The  telephone  would  have  spread 
to  smaller  cities  and  to  more  remote  country  districts; 
above  all,  it  would  have  come  into  much  more  common 
use  in  those  cities  in  which  it  had  been  established.  The 
restrictions  and  lack  of  way-leaves  which  had  prevented 
that  development,  will  be  described  in  a  subsequent 
Spread  of  chapter.     Suffice  it  to  state  here,  that 

Telephone  alarms  even  such  progress  as  had  been  made  in 
Government  ^^^  y^^^.^  jgg^  ^^  jg^^,  had  thoroughly 

alarmed  the  Government.  In  the  large  cities  the  use 
of  the  telephone  had  begun  to  threaten  the  large  traffic 
in  intra-city  telegraphic  messages  which  the  Post  Office 
Telegraphs  had  built  up  since  1870.  And  in  those 
districts  in  which  the  telephone  trunk  lines  had  been 
fairly  well  developed,  the  inter-city  use  of  the  telephone 

^Report  of  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  365,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company; 
and  The  Electrician ;  April  5,   1900. 


THE  COMPULSORY  SALE  41 

had  made  serious  inroads  upon  the  telegraph  business. 
The  National  Telephone  Company  had  achieved  those 
successes  in  spite  of  the  fact  that  it  had  been  compelled 
to  retain  the  single  wire,  or  earth  circuit  system,  which 
made  it  practically  impossible  to  provide  a  satisfactory 
service  in  the  large  cities. 

In  1884,  1885  and  1888,  the  National  Telephone 
Company  had  lodged  Bills  in  Parliament  which  pro- 
posed to  give  the  Company  rights  of  way  in  the  city 
streets  and  upon  the  country  roads.  With  those  rights 
of  way  the  Company  would  have  been  able  to  offer  the 
public  so  satisfactory  a  service  that  the  use  of  the  tele- 
phone for  the  purpose  both  of  intra-city  and  inter-city 
communication  would  have  received  an  enormous  im- 
petus. What  room  for  improvement  there  was,  is 
indicated  by  the  fact  that  in  1892  it  was  possible  to 
converse  more  distinctly  between  London  and  Paris 
by  means  of  the  metallic  circuit  telephone  system,  es- 
tablished in  1 89 1,  than  it  was  possible  to  converse  be- 
tween different  houses  in  London  by  means  of  the 
existing  single  wire  system. 

In  1892  the  National  Telephone  Company  for  the 
fourth  time  lodged  a  Bill  in  Parliament,  asking  for 
rights  of  way,  the  Government  of  the  day  having 
vetoed  the  Bills  of  1884,  1885  and  1888.  By  1892 
the  public  dissatisfaction  with  the  inadequate  and  ineffi- 
cient service  supplied  by  the  National  Telephone  Com- 
pany had  become  so  intense  that  the  Government  did 
not  dare  to  dismiss  the  National  Telephone  Company 


42  THE   TELEPHONE    IN   GREAT    BRITAIN 

in  the  fashion  of  1884,  1885  and  1888.  On  the  other 
hand,  increased  competition  from  the  telephone  was 
even  more  unwelcome  to  the  Post  Office  in  1892  than 
it  had  been  in  1884,  1885  and  1888.  The  increases  in 
the  salaries  and  wages  of  the  telegraph  employees 
granted  in  1880  and  in  1891,  largely  under  pressure 
exerted  upon  the  House  of  Commons  by  the  postal  em- 
ployees' unions,  had  greatly  increased  the  cost  of  con- 
ducting the  telegraph  busin'^ss.  Again,  the  reduction, 
in  1885,  of  the  telegraph  tariff,  from  24  cents  for  20 
words,  to  12  cents  for  12  words,  which  had  been 
forced  upon  the  Government  of  the  day,  by  the  House 
of  Commons  under  the  leadership  of  Dr.  Cameron,* 
M.  P.  for  Glasgow,  had  seriously  weakened  the  Post 
Office  Telegraphs  for  the  task  of  meeting  the  competi- 
tion from  the  telephone.  The  charge  of  12  cents  for 
12  words  barely  covered  the  cost  of  the  long-distance 
messages.  On  the  other  hand,  the  telephone  was  tak- 
ing from  the  Post  Office  the  highly  profitable  intra- 
city  traffic  as  well  as  the  comparatively  highly  profitable 
short  distance  inter-city  traffic,  leaving  to  it  the  com- 
paratively unprofitable  long-distance  inter-city  traffic.^ 

Under  the  circumstances  just  outlined,  the  Govern- 

^  Hansard's  Parliamentary  Debates;  March  29,   1883,  p.  995. 

"Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  32  to  51,  274  and  275,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to 
Post  Office ;  and  Report  from  the  Select  Committee  on  the  Tele- 
phone Service,  1895  ;  q.  68  to  167,  5182  to  5185,  5265  to  5290,  Mr.  J. 
C.  Lamb,  Assistant  Secretary  to  Post  Office ;  and  Report  from  the 
Select  Committee  on  Telephones,  1898;  q.  8131,  Mr.  John  Gavey, 
Second  Assistant  Engineer-in-Chief  to  Post  Office. 


THE  COMPULSORY  SALE  43 

ment   resolved  to   ask   Parliament   to   confer   certain 
limited  rights  of  way  on  the  National  Telephone  Com- 
pany, in  order  that  the  Company  might 

Motive  of  so-         ,  .  •       i      i 

called  Purchase     improve  its  service  both  as  to  quality 

of  Long  Distance  and  as  to  extent.  On  the  other  hand, 
the  Government  proposed  to  protect, 
not  the  Post  Office  Telegraphs  directly,  but  the  State 
Treasury,  by  compelling  the  National  Telephone  Com- 
pany to  sell  its  trunk  lines  to  the  Post  Office.  In  other 
words,  the  Government  proposed  to  appropriate  the 
earnings  from  the  inter-city  telephone  business,  by  way 
of  compensating  itself  for  the  passing  of  a  large  part 
of  the  more  remunerative  telegraph  business  from  the 
Post  Office  Telegraphs  to  the  long-distance  telephone. 
The  Government  called  the  proposed  transaction  a 
purchase,  because  it  proposed  to  pay  the  National  Tele- 
phone Company  what  the  trunk  lines  had  cost  the  Com- 
pany. The  National  Telephone  Company,  on  the 
other  hand,  to  the  last,  remained  an  unwilling  party  to 
the  transaction.^  Voluntarily  it  would  not  have  parted 
with  its  trunk  lines  to  any  one;  for  the  possession  of 
the  trunk  lines  practically  placed  it  beyond  the  possi- 
bility of  competition.  At  that  time  upward  of  60  per 
cent,  of  the  telephone  subscribers  in  some  of  the  large 
provincial  cities  made  daily  use  of  the  long-distance 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s;  q.  231,  234  and  361,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to 
Post  Office ;  and  Report  from  the  Select  Committee  on  Telephones. 
1898;  q.  21 12,  Sir  James  Fergusson,  Postmaster  General  from  Sep- 
tember, 1891,  to  August,  1892;  and  q.  610  to  616,  and  891  to  899, 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office. 


44         THE  TELEPHONE   IN   GREAT   BRITAIN 

telephone;^  and  it  was  practically  impossible  to  get 
customers  enough  to  warrant  the  establishment  of  a 
local  exchange,  unless  one  could  promise  intending 
subscribers  a  long-distance  service.  But  the  Govern- 
ment held  the  whip  hand.  In  the  first  place,  practically 
the  whole  of  the  National  Telephone  Company's  trunk 
lines  had  been  erected  on  the  permanent  way  of  the 
railway  companies,  subject  to  six  months'  notice  of  re- 
moval from  the  Post  Office,  which,  under  the  monop- 
oly acquired  in  1869,  had  the  sole  right  to  authorize 
the  railway  companies  to  permit  anyone  to  erect  poles 
and  wires  upon  their  property.-  The  Post  Office  could 
have  given  the  Company  six  months'  notice,  and  could 
then  have  established  its  own  trunk  line  service;  par- 
ticularly since  the  New  Telephone  Company^  was  ready 
to  cooperate  with  the  Post  Office  by  establishing  local 
exchanges  which  would  have  provided  business  for  the 
Post  Office  trunk  lines.  In  the  second  place,  the  Post 
Office  could  have  seriously  embarrassed  the  National 

^Report  from  the  Select  Committee  on  the  Telegraphs  Bill,  1892; 
Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company,  p.  22 ; 
and  q.  126,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office;  and 
Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7801, 
Mr.  J.  C.  Lamb ;  and  q.  7467,  Mr.  W.  E.  L.  Gaine,  General  Manager 
National   Telephone   Company. 

^  The  National  Telephone  Company  paid  the  Post  Office  an 
annual  rental  of  $5.00  per  mile  of  double  wire  for  the  waiving  of 
the  Postmaster  General's  monopoly  rights.  In  addition,  it  paid 
the  railway  companies  annual  rentals. 

^  This  Company  had  been  practically  dormant  since  its  corpo- 
ration in  1885.  Down  to  1891,  it  had  been  hampered  by  the  fact 
that  it  could  not  obtain  telephones ;  and  after  that  year  it  had  been 
unable  to  proceed  because  it  could  not  promise  long-distance  service 
when  it  canvassed  for  subscribers  to  its  proposed   local   exchanges. 


THE  COMPULSORY  SALE  45 

Telephone  Company  by  refusing  that  Company  any 
further  way-leaves  across,  under  or  along  the  railways 
within  the  large  cities.  The  railways  intersect  the 
large  cities  in  so  many  directions,  that  it  is  impossible 
to  establish  an  adequate  telephone  service  without  power 
to  pass  along,  over  and  under  them.^  Finally,  the 
National  Telephone  Company  was  in  so  many  ways 
dependent  upon  the  good-will  of  the  Government,  that 
mere  prudence  forbade  its  refusing  to  grant  any  per- 
emptory demand  made  by  the  Government.^ 

On  March  22,  1892,  the  Postmaster  General,  Sir 
James  Fergusson,  announced  to  the  House  of  Com- 
mons the  Government's  intention  to  purchase  the  tele- 
phone trunk  lines.  After  admitting  that  the  terms  of 
the  Company's  license  had  checked  the  spread  of  the 
telephone,  he  said :  "I  have  given  earnest  attention  to 
this  subject  with  a  view  to  providing  a  system  which 
would  facilitate  instead  of  retard  the  development  of 
the  industry  while  sufficiently  guarding  the  Post  Office 
monopoly,  which,  though  an  ugly  word,  expresses  a 
great  interest  of  the  country  acquired  at  a  great  cost. 
The  two  objects  are  not  incompatible ....  That  there 
is  a  real  danger  of  the  valuable  public  property — the 
telegraph  system — being  injured  by  the  extension  of 

^Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  160,  161  and  182  to  188,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to 
Post  Office ;  and  Report  from  the  Select  Committee  on  Telephones, 
1898;  q.  382  to   386,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 

'The  Times;  July  15,  1892,  Mr.  J.  S.  Forbes,  Chairman  National 
Telephone  Company. 


46  THE  TELEPHONE   IN   GREAT   BRITAIN 

this  telephone  system,  is  proved  by  the  fact  that  wher- 
ever the  telephone  system  has  been  principally  devel- 
oped, there  the  growth  of  the  telegraph  revenue  has 
been  checked.  The  telephone  system  has  been  more 
considerably  developed  in  Lancashire  and  Yorkshire 
than  elsewhere  in  this  country,  and  there  the  growth  of 
the  telegraph  revenue  has  been  most  checked ....  We 
are  prepared  to  facilitate  legislation  giving  certain 
moderate  powers  for  the  construction  of  telegraphs 
[telephone  wires]  by  the  licensees.  These  concessions, 
if  granted  without  corresponding  provisions  for  the 
protection  of  the  public  revenue,  would  be  very  danger* 
ous.  For  if  the  telephone  companies  were  in  communi- 
cation with  all  the  large  towns,  and  sent  messages  all 
over  the  country,  undoubtedly  the  system  would  to  a 
large  extent  supersede  the  use  of  the  telegraphs,  and, 
consequently,  largely  diminish  the  telegraph  revenue. 
Therefore,  it  is  an  essential  feature  in  any  scheme,  if 
carried  out,  that  the  Government  should  have  possession 
of  the  trunk  wires."  A  week  later  the  Postmaster 
General  added :  "The  main  reason  why  the  Government 
desires  to  get  the  trunk  lines  into  their  hands  is  to  see 
that  whatever  revenue  arises  from  the  telephones,  a 
portion  shall  go  to  the  public ....  The  safeguard  of 
the  taxpayer  will  be  our  possession  of  the  trunk  wires, 
and  the  fact  that  a  proportion  of  any  profits  arising 
from  the  increased  transactions  of  the  companies  will 
accrue  to  the  Post  Office,  and  go  to  the  direct  benefit  of 
the  Revenue."* 

^Hansard's  Parliamentary  Debates;  March  22,  1892,  p.  1436;  and 
March   29,  pp.   187   and    191. 


THE  COMPULSORY  SALE  47 

On  March  29,  Dr.  Cameron,  Member  of  Parliament 

for  Glasgow,  moved  that  "the  Post  Office  system  of 

granting  licenses  to  private  telephone  companies  having 

^  ^  resulted  in  the  restriction  of  telephonic 

Government  '■ 

opposed  to  communication  in  this  country  and  a 

Nationalization  ^^^^^^  ^^^  inefficient  service,  this  House 
is  of  opinion  that,  alike  in  the  interest  of  the  postal 
telegraphs  and  the  telephone  service,  the  telephone 
monopoly  possessed  by  the  Post  Office  should  be  worked 
directly  and  in  connection  with  the  Post  Office  Tele- 
graph Department."  In  the  course  of  his  argument, 
Dr.  Cameron  stated  that  the  success  achieved  by  the 
recently  established  long-distance  telephone  between 
London  and  Paris  had  increased  the  Government's 
alarm  at  the  competition  of  the  telephone  with  the 
telegraph,  especially  if  the  National  Telephone  Com- 
pany should  get  such  way-leave  powers  as  would  en- 
able it  to  adopt  the  double-wire,  or  metallic  circuit 
system. 

Dr.  Cameron's  Motion  for  the  nationalization  of  the 
telephone  was  lost  after  the  Postmaster  General,  Sir 
James  Fergusson,  and  the  Chancellor  of  the  Exchequer, 
Mr,  G.  J.  Goschen,  had  opposed  it  on  behalf  of  the 
Government.  Sir  James  Fergusson  said  :  " . .  .  .  the 
House  will  hesitate  before  it  authorizes  the  Government 

^.  .,  f,      .  to    increase  largely   the   duties   of  the 

Civil  Service  ^    ■' 

a  Source  of  Post  Office,  or  the  number  of  people  in 

^^^s*^^  its  employment.     I  think  it  undesirable 

that  there  should  be  a  direct  employment  by  the  State 


48  THE   TELEPHONE    IN   GREAT    BRITAIN 

of  a  great  number  of  employees,  because  it  is  not  un- 
known that  complaints  have  been  made  in  the  House 
with  regard  to  [/.  c,  on  behalf  of]  public  servants  which 
would  never  have  been  heard  of  had  those  persons  been 
servants  of  private  companies,  who  are  able  to  go  into 
the  market  and  obtain  their  servants  at  the  rate  of 
wages  which  is  regulated  by  the  law  of  supply  and 
demand.  Under  such  a  system  the  employees  obtain 
the  best  price  for  their  labor,  and  the  companies  get 
the  work  done  as  cheaply  as  they  possibly  can.  But 
a  different  element  altogether  is  introduced  when  the 
State  becomes  the  employer,  and  the  amount  of  salaries 
to  be  paid  for  a  given  quantity  of  work  is  no  longer 
fixed  by  the  market  price.  In  these  circumstances,  I 
submit  that  the  Government  has  acted  prudently  in 
endeavoring  to  restrict  the  number  of  persons  in  their 
employment ....  and  in  resolving  'not  to  acquire  the 
[entire]  business  of  the  telephone  companies' ....  An- 
other point  presents  itself.  It  is  quite  evident  that 
there  would  be  calls  for  an  extension  of  the  telephone 
in  districts  where  it  would  not  pay.  It  is  much  more 
difficult  for  the  Government  to  resist  such  calls  for 
extension  than  it  would  be  for  private  companies  to  do 
so.  ..  .It  is  for  these  reasons  that  Her  Majesty's  Gov- 
ernment has  not  thought  it  prudent  to  undertake  this 
great  additional  service,  and  has  decided  to  leave  the 
working  of  it*  to  private  companies." 

'  That  is,   the  local  telephone  ser^'ice  as  distinguislied  from  the 
long-distance  service. 


THE  COMPULSORY  SALE  49 

The  Chancellor  of  the  Exchequer,  Mr.  G.  J.  Goschen, 
said:  "...  .1  am  not  prepared  to  accept  to  an  indefinite 
degree  the  growing  disposition  of  the  public  to  place 
new  duties  on  the  State.  The  Postmaster  General  is, 
I  think,  at  present  at  the  head  of  an  army  of  100,000 
persons,  and  the  relations  which  he  has  to  establish  and 
maintain  between  the  heads  of  Departments  and  this 
mass  of  employees  is  of  growing  importance,  and  we 
must  not  look  forward  with  any  light  heart  to  the  num- 
ber of  Government  servants  increasing  in  such  vast 
numbers  as  they  do  now  from  year  to  year ....  I  do 
not  think  it  wise  in  the  interests  of  the  country  gen- 
erally   that    the    Government    should    be    continually 

extending  its  functions I  think  I  may  fairly  say 

that  m_y  late  Right  Honorable  Friend,  Mr.  W.  H. 
Smith,  who  had  as  much  experience  as  any  man  of 
Public  Departments  and  of  private  business,  took  the 
strongest  view  on  this  matter,  and  was  entirely  a  party 
to  the  decision  which  the  Cabinet  took  on  this  matter, 
namely  that  they  would  not  undertake  to  buy  up  the 
whole  of  the  telephone  business  of  the  country." 

On  May  23,  1892,  the  Government  laid  before  Par- 
The  State  liament  the  Treasury  Minute  upon  the 

acquires  the  Proposals  for  the  Development  of  the 

t1%i  'n  ""'^'^  Telephone  System  in  the  United  King- 
Service  dom.  That  document  once  more  em- 
phasized the  necessity  of  protecting  the  Public  Revenue. 
It  began:  "It  is  the  object  of  these  proposals,  while 
4 


50  THE   TELEPHONE    IN   GREAT    BRITAIN 

preserving  the  property  in  the  telegraphs,  which  has 
been  paid  for  by  the  nation,  to  secure  that  expansion 
of  the  telephone  system  which  is  called  for  by  public 
opinion  and  the  necessities  o£  commerce.  It  is  im- 
possible to  continue  the  present  system  under  which 
the  telegraph  revenue  is  suffering,  while,  on  the  other 
hand,  the  extension  of  telephones  is  checked  in  a 
manner  which  cannot  be  permanently  maintained.  .  .  . 
Unless  the  trunk  wires  are  in  the  hands  of  the  State, 
a  monopoly  injurious  to  the  public  interest  would 
inevitably  ensue,  to  the  advantage  of  the  company 
which  first  laid  down  such  trunk  lines.".  .  .  . 

At  the  same  time  that  the  Government  laid  the  fore- 
going Treasury  Minute  before  Parliament,  it  brought 
in  a  Bill  to  authorize  the  Government  to  raise  $5,000,- 
000  for  the  purpose  of  purchasing,  and  subsequently 
extending,  the  National  Telephone  Company's  trunk 
wires.  The  Select  Committee  to  which  the  Bill  was 
referred  reported  in  favor  of  the  proposed  purchase, 
and  recommended  that  the  terms  of  the  sale  be  left  to 
negotiation  between  the  Companies  and  the  Govern- 
ment, but  that  the  Government  should  not  grant  the 
request  of  the  National  Telephone  Company  for  an 
extension  of  its  license  in  part  consideration  of  the 
transfer  of  the  trunk  wires.  The  Bill  became  law. 
"After  a  great  deal  of  difficulty,"^  the  National  Tele- 
phone  Company   and   the    Government    agreed    upon 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  q.  87,  Mr.  J.  C.  Lamb,  Assistant   Secretary  to  Post  Office. 


THE  COMPULSORY  SALE  51 

terms;  and  in  August,  1892,  the  heads  of  the  agree- 
ment were  initialled  by  the  Government  and  the  Na- 
tional Telephone  Company.  It  took  three  years  of 
further  negotiation  to  settle  the  details  of  the  transfer 
in  accordance  with  the  heads  of  the  Agreement ;  and 
in  March,  1896,  the  trunk  wires  were  transferred  to 
the  Post  Office.  The  cash  consideration  was  $2,295,- 
570,  for  2,651  route-miles,  or  29,000  miles  of  wire. 
That  sum  represented  the  Post  Office  Department's 
estimate  of  the  original  cost  of  the  trunk  lines,  includ- 
ing an  allowance  of  10  per  cent,  for  "supervision  and 
headquarters"  charges.*  The  National  Telephone  Com- 
pany had  stated  that  the  trunk  lines  had  cost 
$2,450,000 ;  but  it  had  not  kept  its  books  in  such  a  way 
as  to  be  able  to  show  conclusively  the  aggregate  sum 
spent." 

The  National  Telephone  Company  not  only  parted 
with  its  trunk  wires,  but  also  relinquished  its  right  to 

_,     ^  establish  at  its  pleasure  the  limits  of  its 

The  State  to 

demarcate  the       several  local  telephone  areas.     It  ceded 

Local  Telephone    to  the  Government  the  right  to  divide 
the   United   Kingdom   into   local   tele- 
phone areas  to  which  the  several  local  telephone  ex- 
changes must  confine  themselves.     The  principles  upon 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  395 
to  397,  and  62,  Sir  Robert  Hunter,  Solicitor  to  Post  Office ;  and 
Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  1810,  1878  and  1892,  Mr.  John  Gavey,  Engi- 
neer-in-Chief  to  Post  Office. 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  q.  226  and  229,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post 
Office. 


52  THE   TELEPHONE   IN   GREAT   BRITAIN 

which  the  Government  agreed  to  demarcate  the  areas 
were :  "industrial  areas  of  wide  extent  to  be  recognized 
as  telephone  areas  in  cases  where  there  are  no  consid- 
erable towns  forming  centers  of  business;  neighboring 
towns  intimately  connected  in  their  business  relations 
to  be  included  in  one  area;  small  towns  or  villages  in 
any  one  of  which  it  would  be  hopeless  to  establish  a 
local  exchange  system  unless  there  were  some  cheap 
means  of  communicating  wich  each  other,  to  be  grouped 
in  one  area."^  It  proved  so  difficult  for  the  Post  Office 
Department  and  the  National  Telephone  Company  to 
agree  upon  the  application  of  these  principles  to  the 
individual  cases,  that  the  negotiations  were  not  con- 
cluded until  early  in  1895.^ 

The  National  Telephone  Company  desired  to  make 
the  local  areas  very  large,  in  order  to  protect  itself 
against  possible  municipal  competition,  it  having  been 
established  by  experience  in  the  field  of  street  railw^ay 
operation  and  electric  lighting,  that  it  Is  extremely  diffi- 
cult to  get  adjoining  local  authorities  to  act  together 
for  the  purpose  of  establishing  and  operating  extensive 
plants.  In  a  letter  written  in  February,  1893,  ^o  Mr. 
J.  C.  Lamb,  Assistant  Secretary  to  Post  Office,  Mr. 
Gaine,  General  Manager  National  Telephone  Company, 
stated  the  company's  position.  He  asked  "that  certain 
facts  be  taken  into  consideration  in  dealing  with  the 

*  Report  from  the  Select  Committee  on  Telephones,  1898;  q.  695, 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Ofifice. 

'Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  217,  Mr. 
Arnold  Morley,   Postmaster   General,    1892  to    1895. 


THE  COMPULSORY  SALE  53 

demarcation  of  the  telephone  areas,  namely,  a  spring- 
ing up  in  certain  large  towns  of  a  desire  for  the  munici- 
palization of  the  telephones.  With  the  trunk  wires  in 
the  hands  of  the  company,  the  company  would  not  fear 
municipal  competition,  but  without  that  it  would  object 
to  municipal  competition  as  unfair — because  rate-aided, 
and  because  municipalities  might  deny  to  companies 
facilities  for  putting  wires  underground  which  the  Cor- 
poration [municipality]  would  grant  to  itself.  ...  It  is 
true  that  the  construction  of  large  areas  such  as  I  have 
indicated,  would  trench  upon  the  Post  Office  revenue,^ 
but  that  might  be  met  by  providing  for  an  adequate 
payment  by  the  company  to  the  Post  Office."  Mr. 
Lamb  replied  that  the  Post  Office  could  not  accede  to 
the  request  of  the  National  Telephone  Company,  partly 
because  the  Post  Office  was  unwilling  to  commit  itself 
on  the  question  of  municipal  competition,  though  at  the 
time  no  municipality  had  applied  for  a  telephone  license; 
partly  because  the  Post  Office  wished  to  avoid  the  ex- 
pense which  would  arise  from  the  necessity  of  building 
trunk  wires  to  more  than  one  of  the  National  Tele- 
phone Company's  exchanges  in  any  single  area.  Mr. 
Lamb  cited  the  case  of  Wolverhampton,  a  city  of  about 
90,000  inhabitants,  which,  at  the  time,  formed  a  part 
of  the  National  Telephone  Company's  Birmingham 
telephone  area.  He  said  that  many  members  of  Parlia- 
ment had  urged  the  Postmaster  General,   Sir  James 


*  By  diminishing  the  number  of  trunk  wires,  and  thus  reducing 
the  trunk  wire   conversation   fees. 


54  THE   TELEPHONE   IN   GREAT   BRITAIN 

Fergusson,  to  make  Wolverhampton  a  separate  area, 
in  order  that  the  pubHc,  when  desirous  of  using  the 
Post  Office  trunk  wires,  might  not  be  compelled  to  use 
the  National  Telephone  Company's  wires  for  the  pur- 
pose of  reaching  the  Post  Office  trunk  wires  at  Birming- 
ham, the  center  of  the  area.*  In  accordance  with  those 
requests  the  Post  Office  broke  the  Birmingham  area  up 
into  four  separate  areas.  It  pursued  a  similar  course 
at  Newcastle  and  North  and  South  Shields.  All  of 
those  areas  had  been  established  previous  to  1892.  At 
the  present  time  the  largest  telephone  areas  in  England 
are  said  to  be  not  nearly  so  big  as  are  some  of  the  local 
areas  on  the  Continent,  especially  in  the  great  manufac- 
turing and  mining  districts  along  the  Rhine.^  That  is 
a  matter  of  importance,  first,  because  the  Post  Office 
makes  charges  for  the  use  of  the  trunk  wires;  and 
secondly,  because  the  Post  Office  has  failed  to  increase 
the  trunk  wire  facilities  in  correspondence  with  the 
growth  of  business. 

In  passing,  it  should  be  added,  that  after  the  Post 
Office  had  rejected  the  Company's  request  that  the 
local  areas  be  made  so  large  as  to  preclude  the  future 
establishment  of  municipal  telephone  plants,  the  Com- 
pany accepted  that  refusal  without  reserve  and  acted 
"in  a  very  straight-forward  manner"  throughout  the 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  8596 
to  8598,  and  8880. 

"Report  from  the  Select  Committee  on  Telephones,  1898;  testi- 
mony of  Mr.  Lamb,  Second  Secretary  to  Post  Office,  q.  8596  to  8598, 
8877  to  8880,  864T  and  8642,  2gii,  3002,  1971,  2996,  751  to  754,  and 
3131  to  3139;  and  Sir  James  Fergusson,  q.  2102. 


THE  COMPULSORY  SALE  55 

negotiations  concerning  the  demarcation  of  areas.^  On 
the  other  hand,  the  Post  Office  throughout  those  nego- 
tiations was  governed  exclusively  by  the  twofold  de- 
sire to  protect  the  Post  Office  trunk  revenue  and  to 
serve  the  public  convenience.  It  gave  no  thought  to 
the  question  of  the  effect  of  the  demarcation  of  areas 
on  the  possibility  of  the  future  establishment  of  munici- 
pal telephone  plants.  It  gave  to  that  question  no 
thought  one  way  or  the  other,  since  "it  was  not  the 
policy  at  the  time  to  entertain  applications  [for  licenses] 
from  municipalities."^ 

In  addition  to  submitting  to  the  foregoing  curtail- 
ments of  rights,  the  National  Telephone  Company  was 
obliged  to  assume  the  obligation  to  buy  all  of  the  out- 
standing telephone  licenses  which  it  had  not  yet  ac- 
quired, and  to  turn  them  over  to  the  Post  Office,  free 
of  cost.  The  reason  for  putting  that  obligation  upon 
the  National  Telephone  Company  was  that  the  out- 
standing licenses  conferred  the  power  to  install  ex- 
changes anywhere,  and  to  connect  those  exchanges  by 
means  of  trunk  wires.  To  the  Isle  of  Thanet  Tele- 
phone Company,  which  had  no  plant,  but  owned  a 
license,  the  National  Telephone  Company  was  obliged 
to  pay  $100,500.^ 

^Hansard's  Parliamentary  Debates;  March  i,  1895,  P-  217,  Mr. 
Arnold    Morley,    Postmaster    General    from    1892    to    1895. 

^Report  from  the  Select  Committee  on  Telephones,  1898:  q.  2981, 
8641,  8877  and  8880,  Mr.  J.  C.  Lamb,  who,  as  Assistant  Secretary 
to  Post  Office,  conducted  the  negotiations  on  behalf  of  the  Govern- 
ment. 

'Report  from  the  Select  Committee  on  Telephones,  1898;  q.  1139. 
Mr,   J.    C.    Lamb,    Second    Secretary    to    Post    Office;    and    q.    5816, 


56  THE   TELEPHONE    IN   GREAT    BRITAIN 

Finally,  the  Post  Office  reserved  the  right  to  estab- 
lish Post  Office  telephone  plants  anywhere;  as  well  as 

D  ,•        ,       the  rig-ht  to  authorize  anywhere  new 

Reservation  of  ^  ■' 

Right  to  author-  companies  to  compete  with  the  National 
tze  Competition  Telephone  Company,  provided  such 
companies  could  obtain  the  consent  of  the  local  authori- 
ties concerned.  That  is,  the  Government  reserved 
that  right  so  far  as  the  letter  of  the  law  was  concerned. 
But  Mr.  G.  J.  Goschen,  Chancellor  of  the  Exchequer, 
as  representative  of  the  Government,  stated  in  the 
House  of  Commons  that  the  Government  policy  was 
not  to  authorize  competition  with  the  National  Tele- 
phone Company  so  long  as  that  Company  should  not 
abuse  its  powers  or  neglect  its  duties  as  a  public  service 
corporation.^ 

In  consideration  of  the  concessions  which  the  Na- 
tional Telephone  Company  made  to  the  Government, 
the  latter  body  induced  Parliament  to  authorize  the 
Postmaster  General,  at  his  pleasure,  to  confer  upon  the 
National  Telephone  Company  such  rights  of  way,  or 
way-leaves,  as  the  Postmaster  General  himself  possessed 
under  the  Telegraph  Acts  of  1863  and  1878,  as  well 
The  Municipal  ^^  Under  section  2,  clause  11,  of  the 
^eto  Telegraphs  Act,   1892, — provided  that 

in  each  individual  case  the  consent  of  the  local  author- 
ity concerned  be  obtained.     Since  there  was  no  appeal 

5833,    6282,    6271    and    6277,   Mr.   J.    S.    Forbes,    Chairman   National 
Telephone  Company  ;  and  Report  from  the  Select  Committee  on  the 
Telephone  Service,  1895;  q.  4192  to  4195,  Mr.  J.  S.  Forbes. 
^Hansard's  Parliamentary  Debates;  March  29,  1892,  p.  195. 


THE  COMPULSORY  SALE  57 

from  the  refusal  of  a  local  authority  to  give  its  consent, 
the  National  Telephone  Company  in  some  important 
cities  never  succeeded  in  obtaining  any  rights  of  way, 
beyond  private  rights  of  way  from  house-top  to  house- 
top. In  many  other  cities  and  towns  the  National 
Telephone  Company  obtained  rights  of  way  in  the 
streets  only  after  great  delay  and  upon  onerous  terms. 

Before  the  Select  Committee  on  Telephones,  1898, 
Mr.  W.  E.  L.  Gaine,  General  Manager  National  Tele- 
phone Company,  testified  that  when  the  Government 
opened  the  negotiations  which  led  to  the  Company's 
acceptance  of  the  Agreement  of  1892,  the  Government 
promised  the  Company  adequate  way-leaves.  But 
that  when  the  Bill  was  laid  before  Parliament,  it  con- 
tained the  provision  giving  the  local  authorities  an 
absolute  veto  upon  the  exercise  of  any  way-leave  pow- 
ers.^ This  change  of  policy  on  the  part  of  the  Gov- 
ernment was  due  to  the  influence  of  the  powerful  Asso- 
ciation of  Municipal  Corporations,^  before  whom  has 
bowed  more  than  one  British  Ministry. 

The  Government  made  several  additional  and  minor 
concessions  to  the  National  Telephone  Company.  It 
removed,  in  part,  the  prohibition  against  a  messenger 
Minor  Con-  being  sent  out  from  a  public  telephone 

cessions  call  office  for  the  purpose  of  calling  a 

non-subscriber  to  the  station  to  answer  a  telephone  call. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7164. 

'Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s  ;  q.  1420  and  1422,  Mr.  H.  E.  Clare,  Deputy  Town  Clerk  of 
Liverpool  and  Representative  of  the  Association  of  Municipal  Cor- 
porations. 


58  THE   TELEPHONE   IN    GREAT   BRITAIN 

This  relaxation  of  the  restrictions  upon  the  use  of  the 
public  pay  stations  applied  only  to  messages  sent  be- 
tween stations  in  the  same  telephone  area.  The  Post 
Office  continued  the  prohibition  against  a  person,  say, 
in  London,  calling  to  a  public  pay  station,  say,  in  Man- 
chester, a  non-subscriber  to  the  telephone  in  Manches- 
ter. That  prohibition  was  retained  in  order  to  protect 
the  Post  Office  Telegraphs  from  competition  from  the 
telephone.^ 

The  Post  Office  also  withdrew  the  prohibition  upon 
the  establishment  of  public  pay  stations  by  the  National 
Telephone  Company  in  the  shops  of  the  tradesmen  who 
acted  as  sub-postmasters  and  conducted  small  branch 
Post  Offices.  It  also  agreed  to  consider  the  question  of 
allowing  the  National  Telephone  Company  to  establish 
public  pay  stations  in  the  head-district  Post  Offices  and 
the  main  branch  Post  Offices.^  The  prohibition,  in 
the  past,  of  the  establishment  of  such  pay  stations  had 
been  based  upon  the  desire  to  protect  that  part  of  the 
telegraph  business  which  consisted  of  the  sending  of 
intra-city  telegrams. 


*  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  q.  4560  to  4570,  Mr.  J.  S.  Forbes,  Chairman  National  Tele- 
phone Company;  and  q.  loi,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to 
Post  Office ;  Report  from  the  Select  Committee  on  Telegraphs  Bill, 
1892,  q.  56,  Mr.  J.  C.  Lamb;  Report  from  Joint  Committee  on  Elec- 
tric Powers  (Protective  Clauses),  1893;  Q-  i345  :  Treasury  Minute, 
May  23,  1892;  and  Report  from  Select  Committee  on  Telephones, 
1898;  q.  6042,  Mr.  W.  E.  L.  Gaine,  General  Manager  National 
Telephone  Company;  q.  621  to  672,  Mr.  J.  C.  Lamb;  and  q.  1616  to 
1 621,   Mr.  A.   R.  Bennett. 

^Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  73.  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office. 


THE  COMPULSORY  SALE  59 

Finally,  the  Government  established  the  following 
scale  of  charges  for  a  three  minute  conversation  over 
the  trunk  lines.  For  distances  not  exceeding  25  miles, 
Scale  of  Lons  ^  cents;  for  distances  between  25  and 
Distance  Tele-  50  miles  inclusive,  12  cents;  for  dis- 
phone  Charges  tances  between  50  and  75  miles  inclu- 
sive, 18  cents;  for  distances  between  75  and  100  miles 
inclusive,  24  cents;  and  for  each  additional  40  miles, 
or  fraction  thereof,  an  additional  charge  of  12  cents. 
The  National  Telephone  Company's  charges  had  been 
identical  with  these  for  distances  up  to  100  miles;  but 
for  distances  beyond  100  miles,  they  had  increased  at 
the  rate  of  12  cents  additional  for  each  additional  25 
miles,  or  fraction  thereof.* 

The  Telegraphs  Bill,  1892,  authorizing  tlie  Post 
Office  to  make  the  foregoing  arrangements  with  the 
National  Telephone  Company,  was  referred  to  a  Select 
Committee  in  June,  1892.  The  Committee  approved 
the  proposed  arrangements,  with  the  proviso  that  the 
Government  should  not  grant  the  Company's  request 
for  an  extension  of  its  license  in  consideration  of  the 
valuable  concessions  made  to  the  Government.  There- 
upon the  Government  and  the  Company  reached  an 
Agreement ;  initialled  the  heads  of  the  Agreement,  and 
laid  the  resulting  document  on  the  Table  of  the  House. 


^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  621, 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office ;  and  Report  from 
the  Select  Committee  on  the  Telephone  Service,  1895  ;  q.  235,  Mr. 
J.  C.  Lamb. 


60  THE    TELEPHONE   IN    GREAT    BRITAIN 

The  Agreement,  as  finally  drawn,  was  laid  before  Par- 
liament in  1894,  and  was  accepted  by  the  House  of 
Commons  in  1895,  after  a  debate  upon  the  Motion  of 
Mr.  J.  W.  Benn,  that  the  Agreement  should  not  be 
confirmed. 

The  Post  Office  purchased  the  trunk  wires  on  March 
25,  1896.  Since  it  had  neither  stafif  nor  exchange 
buildings,  it  appealed  to  the  Company  for  aid ;  and  the 
Company  continued  to  operate  the  trunk  wires  until  it 
was  convenient  for  the  Post  Office  to  assume  the  opera- 
tion. In  addition,  the  Company  from  time  to  time 
supplied  the  Post  Office  with  skilled  workmen  and 
operators,  as  well  as  permitted  the  Post  Office  to  send 
operators  into  the  Company's  switch  rooms  to  be  trained 
to  their  work.^  The  harmonious  relations  between  the 
Company  and  the  Post  Office  indicated  by  the  fore- 
going facts,  never  were  disturbed  or  broken,  so  far  as 
were  concerned  the  National  Telephone  Company  and 
the  permanent  officers  of  the  Post  Office,  whose  busi- 
ness it  was  to  know  to  a  nicety  how  the  National  Tele- 
phone Company  was  carrying  out  its  duties  as  a  public 
service  corporation.  When  Mr.  Hanbury,  a  Conserva- 
tive statesman  of  great  personal  force,  made  himself 
the  champion  of  the  cause  of  municipal  telephones,  and 
cultivated  the  habit  of  speaking  of  the  National  Tele- 
phone Company  as  a  public  enemy,  if  not  as  a  criminal, 
he  remained  without  the  sympathy  and  the  support  of 

^  The  Times;  January  23,  1899:  The  Case  of  the  National  Tele- 
phone Company,  by  a  Correspondent. 


THE  COMPULSORY  SALE  61 

a  single  one  of  the  prominent  Post  Ofifice  officials  who 
were  in  a  position  to  know  how  the  Company  was  dis- 
charging its  public  obligations. 

When  the  telephone  began  to  make  serious  inroads 
upon  the  national  telegraphs,  the  Government  should 
have  taken  one  of  two  courses.     Either 
ummary  .^  should  have  reformed  the  adminis- 

tration of  the  national  telegraphs;  or  it  should  have 
purchased  the  entire  property  of  the  National  Tele- 
phone Company,  under  its  power  to  purchase  on  arbi- 
tration terms  in  1890  or  1897.  The  reform  of  the 
administration  of  the  national  telegraphs  was  politi- 
cally inexpedient.  It  v-ould  have  aroused  the  opposi- 
tion of  the  civil  servants,  of  the  newspaper  press,  and 
of  that  section  of  the  public  that  was  benefited  by  the 
unbusinesslike  practice  of  a  uniform  charge  for  tele- 
grams irrespective  of  the  distance  that  telegrams  were 
sent.^  On  the  other  hand,  the  Government  was  un- 
willing to  purchase  the  entire  property  of  the  National 
Telephone  Company  because  of  the  grave  political  dan- 
ger inherent  in  the  increase  in  the  number  of  the  civil 
servants  which  that  purchase  would  have  entailed. 
Under  the  circumstances  the  Government  resolved  to 
compel  the  National  Telephone  Company  to  part  with 
its  long-distance  telephone  service,  not  on  arbitration 
terms,  but  at  cost  of  construction.  It  also  resolved  to 
compel  the  Company  to  give  up  the  right  to  demarcate 

Compare   H.    R.    Meyer:     The    British   State   Telegraphs. 


62  THE    TELEPHONE   IN    GREAT    BRITAIN 

the  areas  of  its  local  exchanges.  The  Company  ac- 
cepted the  Government's  policy  only  under  compulsion ; 
for  the  right  to  demarcate  the  local  exchange  areas  and 
to  connect  them  by  means  of  long-distance  telephone 
lines,  practically  exempted  the  Company  from  the  possi- 
bility of  competition.  The  Government  somewhat 
allayed  the  apprehensions  of  the  Company,  by  announc- 
ing, through  the  Chancellor  of  the  Exchequer,  that 
while  it  reserved  full  power  to  authorize  any  kind  of 
competition,  it  was  not  its  intention  to  authorize  com- 
petition so  long  as  the  Company  should  not  become 
guilty  of  neglect  or  violation  of  duty  as  a  public  serv- 
ice corporation.  The  Government  which  made  that 
announcement  represented  the  Conservative  Party. 
Seven  years  later,  in  1899,  the  Conservative  Party,  in 
obedience  to  the  exigencies  of  politics,  authorized  every 
local  authority  to  engage  in  competition  with  the 
National  Telephone  Company,  though  the  latter  had 
been  guilty  of  no  neglect  or  violation  of  duty. 


CHAPTER  V 

THE    POST    OFFICE    FAILS    TO    PROVIDE    AN 
ADEQUATE  LONG-DISTANCE  SERVICE 

The  fear  of  "log-rolling"  induces  the  Government  to  adopt  the 
policy  of  making  no  extensions  of  the  long  distance  telephone 
service,  unless  no  financial  risk  is  involved,  or,  the  districts  to  be 
served  shall  guarantee  "a  specific  revenue  per  year,  fixed  with 
reference  to  the  estimated  cost  of  working  and  maintaining  a 
given  mileage  of  trunk  line  wire."  Evidence  in  detail  that  the 
Government  has  failed  to  provide  adequate  long-distance  tele- 
phone facilities.  Thus  far  no  Government  elected  directly  or  in- 
directly by  universal  manhood  suffrage  has  been  able  to  husband 
its  resources  so  as  to  be  able  properly  to  finance  such  industrial 
ventures  as  it  may  have  undertaken.  In  that  respect  the  ex- 
perience of  Great  Britain  has  been  a  repetition  of  the  experience 
of  France,  Italy,  Australia  and  Prussia. 

One  of  the  strongest  objections  urged  by  the  Na- 
tional Telephone  Company,  in  1892,  against  the 
Government's  proposal  to  purchase  the  telephone  long- 
distance trunk  lines,  was,  that  there  would  be  serious 
danger  that  the  Government  would  prove  unwilling  or 
unable  to  provide  for  the  proper  extension  of  the  trunk 
lines.*  The  Company  added  that  in  the  erection  of 
trunk  lines  they  had  found  one  of  the  most  potent  stimu- 
lants for  their  local  exchanges,  many  people  joining  the 

^Report  from  the  Select  Committee  ott  Telegraphs  Bill,  1893; 
p.  22,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company. 

63 


64  THE   TELEPHONE   IN    GREAT   BRITAIN 

local  exchange  for  the  express  purpose  of  speaking  to 

other  towns.     By  way  of  illustration,  they  cited  the 

fact  that  in  Manchester,  Liverpool  and 
Importance  of  ......  , 

an  Adequate  other  large  provincial  cities   about  65 

Long-distance  per  cent,  of  the  subscribers  used  the 
trunk  lines  daily. ^  In  July,  1898,  two 
years  after  the  Post  Office  had  taken  over  the  trunk 
lines,  Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office, 
fully  corroborated  the  foregoing  testimony.  He  stated 
that  "experience  was  proving  that  in  the  smaller  towns 
local  exchange  services  could  not  be  established  unless  at 
the  same  time  a  trunk  service  was  provided."  ...  At 
the  same  time  Mr.  W.  E.  L.  Gaine,  General  Manager 
National  Telephone  Company,  stated  that  in  country 
towns  the  Company's  usual  rate  of  subscription  was 
$40  a  year,  if  access  could  be  given  to  a  trunk  line ;  if 
not,  then  $30  or  $32. 50.^ 

The  apprehensions  of  the  National  Telephone  Com- 
pany were  amply  justified  by  subsequent  events.  As 
soon  as  the  Post  Office  had  taken  over  the  trunk  lines, 

■^  .,  the  Treasury  laid  down  the  rule  that 

Government  s  ■' 

Fear  of  the  Post  Office  must  not  proceed  on  a 

"Log-rolling  commercial    basis     in     extending    the 

trunk  lines,  that  is,  it  must  not  use  its  discretion  and 
make  experimental  or  tentative  efforts  for  the  purpose 

^Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  365  and  369,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone 
Company,  and  q.  126,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post 
Office. 

'^Report  from  the  Select  Committee  on  Telephones,  1898,  q.  7801, 
Mr.  J.  C.  Lamb ;  and  q.  7467,  Mr.  Gaine. 


ADEQUATE  SERVICE  NOT  PROVIDED  65 

of  ascertaining  where  extensions  would  promise  to  be 
financially  successful,  and  where  they  would  be  likely  to 
prove  unremunerative.  The  Treasury  compelled  the 
Post  Office  to  adopt  the  policy  of  refusing  to  make  any 
extensions  of  doubtful  prospect,  unless  private  persons, 
or  the  local  authority  interested,  should  guarantee  "a 
specific  revenue  per  year,  fixed  with  reference  to  the 
estimated  cost  of  working  and  maintaining  a  given 
mileage  of  trunk  line  wire."^  The  log-rolling  de- 
veloped in  the  years  1870  to  1873,  "^vhen  the  Post  Office 
had  extended  the  telegraph  lines  "on  commercial  con- 
siderations," had  been  such  that  the  Treasury  was  un- 
willing to  run  the  risk  of  a  repetition  of  that  experience 
in  the  field  of  State  telephone  tnmk  lines."  The  reader 
will  recall  the  fact  that  in  1892,  Sir  James  Fergusson, 
Postmaster  General,  stated  that  the  difficulty  which  a 
political  body  would  experience  in  resisting  the  demands 
for  unprofitable  extensions  of  the  telephone  service  was 
an  important  reason  why  the  State  should  not  take  over 
the  entire  telephone  service.^ 

In  1898  the  National  Telephone  Company  was  guar- 
anteeing the  Post  Office  an  aggregate  annual  revenue 
of  $19,825    on   793   miles   of   trunk  wire  to   various 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  5065 
to  5074,  Mr.  W.  H.  Preece,  Engineer-in-Chief  to  Post  Office ;  and 
q.  684,  Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office ;  Report 
from  the  Select  Committee  on  Telephone  Service,  1895  ;  q.  70  to  73, 
Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office  ;  and  Hansard's 
Parliamentary  Debates;  June  21,  1906,  p.  392,  Mr.  Sydney  Buxton, 
Postmaster  General. 

^H.    R.    Meyer:     The  British   State   Telegraphs. 

^Hansard's  Parliamentary  Debates;   March  29,   1892. 


66  THE   TELEPHONE   IN    GREAT   BRITAIN 

places  in  which  the  Company  was  operating  local  ex- 
changes.^ The  conservatism  of  the  Treasury  is  illus- 
trated in  the  fact  that  the  Post  Office  was  obliged  to 
obtain  a  guarantee  from  the  National  Telephone  Com- 
pany before  it  was  permitted  to  build  to  Southend,  a 
town  of  25,000  inhabitants.^  Under  guarantees  from 
the  National  Telephone  Company,  the  trunk  line 
systein  was  extended  :  in  1900-1901,  to  thirteen  places, 
five  of  which  ranged  in  population  from  5.000  to 
16,000;  in  1901-02,  to  nine  places,  seven  of  which 
ranged  from  4,000  to  11,000;  and  in  1902-03,  to  six 
places,  five  of  which  ranged  from  8,000  to  19,000.^ 

Let  us  examine  somewhat  in  detail  the  evidence  upon 
this  question  of  the  failure  of  the  Government  to  supply 
adequate  trunk  line  facilities.  Though  the  Post  Office 
did  not  take  over  the  trunk  lines  until  March,  1896,  it 

assumed  the  responsibility  for  their 
Government  .         .  ,•       1 

fails  to  supply       extension  mimediately  after  the  heads 

Adequate  of   Agreement   had   been    initialled   in 

August,  1892.  As  early  as  1895,  Mr. 
J.  C.  Lamb,  Assistant  Secretary  to  Post  Office,  ad- 
mitted that  the  development  of  the  telephone  business 
was  being  hampered  by  the  lack  of  trunk  lines.  In  that 
same  year,  Mr.  H.  E.  Clare,  representing  the  Associa- 
tion of  Municipal  Corporations,  stated  that  the  use  of 
the  telephone  between   towns  would  be   "very  much 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6065, 
Mr.  J.   S.   Forbes,   Chairman   National   Telephone   Company. 

'Hansard's  Parliamentary  Debates;  August  3,  1899,  p.  1247, 
Lord  Harris,  a  Director  of  the  National  Telephone  Company. 

^  Garcke :  Manual  of  Electrical  Undertaking,  1904. 


ADEQUATE  SERVICE  NOT   PROVIDED  67 

greater  with  better  trunk  facilities."^  In  1898,  Mr. 
Clare  again  appeared  before  a  Select  Committee,  say- 
ing: "The  great  importance  of  the  telephone  is  its 
commercial  importance.  To  a  business  man  $10  a  year 
is  no  consideration,  he  wants  better  service,  more  trunk 
lines,  rather  than  cheaper  service.  Between  Liverpool 
and  London  we  want  several  more  trunk  wires.  The 
Stock  Exchange  itself  would  employ  several  wires  be- 
tween London  and  Liverpool  if  it  could  get  them." 
Before  the  same  Committee,  Mr.  Gaine,  General  Mana- 
ger of  the  National  Telephone  Company,  said :  "My 
constant  application  to  the  Post  Office  is  for  more 
trunk  wires  [duplications  as  well  as  extensions]  ;  and 
to  prove  to  them  that  the  business  over  the  existing 
wires  is  in  excess  of  what  they  can  carry."  Sir  James 
Fergusson,  who  had  been  Postmaster  General  in  1891 
to  1892,  and,  in  1896,  had  become  a  Director  of  the 
National  Company,  testified :  "Simply  from  the  point 
of  view  of  giving  telephonic  facilities,  I  am  inclined  to 
think  that  a  commercial  company  is  more  sympathetic 
than  the  Post  Office."  .  .  .  Mr.  Lamb,  Second  Secre- 
tary to  Post  Office,  added :  "The  Treasury  has  in 
some  cases  made  considerable  difficulty  in  authorizing 
us  to  expend  money  on  the  construction  of  trunk 
wires."^     In  August,   1899,   in  the  House  of  Lords, 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895;  q.  90  and  154,  Mr.  J.  C.  Lamb;  and  q.  1222  to  1230,  Mr.  H. 
E.  Clare,  Deputy  Town  Clerk  of  Liverpool.  Compare  also :  Report 
from  the  Select  Committee  on  Telephones.  1898;  q.  1976.  Mr.  J.  C. 
Lamb. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  43-5. 
4326,  7109.  2219  and   1976. 


68  THE    TELEPHONE    IN    GREAT    BRITAIN 

Lord  Harris,^  a  Director  of  the  National  Telephone 
Company,  said :  "I  can  assure  the  noble  Duke  [the 
Postmaster  General]  that  if  he  would  appoint  a  com- 
mittee of  impartial  persons  who  use  the  telephone  to 
report  on  the  trunk  service,  that  committee  would  re- 
port that  the  service  was  insufficient  and  inefficient."^ .  . 
In  May,  1900,  Mr.  W.  E.  L.  Gaine,  General  Manager 
National  Telephone  Company,  said :  'T  have,  week  by 
week,  brought  to  me  reports  of  all  the  district  managers 
and  superintendents  with  regard  to  the  trunk  delays 
which  are  taking  place  throughoat  the  United  Kingdom, 
and  1  say,  without  hesitation,  that  a  very  grave  indict- 
ment can  be  framed  against  the  Post  Office  for  the 
manner  in  which  the  trunk  service  of  this  country  is 
carried  out.  ...  I  find  that  throughout  the  United 
Kingdom  delays  are  daily  experienced  of  from  half  an 
hour  to  two  hours  in  duration,  and  I  say  this,  that  no 
trunk  service  is  worthy  of  the  name  which  requires  a 
man  to  wait  upon  an  average,  more  than  five  minutes  in 
order  to  have  his  message  put  through."  Mr.  Gaine 
added  that  the  Government  would  have  to  spend 
$20,000,000  to  make  the  trunk  service  adequate.^  The 
actual  investment  at  the  time  was  $7,500,000;  and  as 
late  as  March  31,  1906,  it  was  only  $14,488,000.^  In 
November,    1900,   the    National   Telephone   Company 

^Under-Secretary  for  India,  1885-86;  Under-Secretary  of  War, 
1886  to  1889;  Governor  of  Bombay,  1890  to  1895;  Lord-in-Waiting 
to  Queen  Victoria,  1895  to  1900. 

^Hansard's    Parliamentary    Debates;    August    3,    1899,    p.    1246. 

^  The  Electrician;  May  11,  1900. 

*  Report  of  the  Postmaster  General  on  the  Post  Office,  1906. 

(Continued  on  page  69.) 


ADEQUATE  SERVICE  NOT   PROVIDED  69 

notified  its  subscribers  of  "an  intimation  from  the  Post 
Office  that  a  minimum  of  20  minutes  must  always 
elapse  before  any  reply  can  be  expected  by  a  subscriber 
as  to  whether  he  can  get  through  to  the  trunk  town  on 
the  trunk  service  with  which  he  wishes  to  communicate. 
The  delay  is  attributed  to  an  insufficiency  of  trunk 
wires  and  a  paucity  of  operators."^ 

In  1 90 1,  the  Annual  Meeting  of  the  Association  of 
Chambers  of  Commerce  resolved :  "That  to  meet  the 
pressing  requirements  of  trade,  a  more  efficient  tele- 
graph and  telephone  service  between  the  commercial 
and  manufacturing  centers  of  the  United  Kingdom  is 
imperatively  necessary :  and  that,  in  certain  districts 
the  usefulness  of  the  trunk  telephone  service  is  much 
impaired  by  its  inadequacy  to  meet  the  demands  made 
upon  it,  and  that,  if  increased  facilities  were  provided, 
and  the  delays  at  present  experienced  in  obtaining 
communication  avoided,  the  volume  of  telephone  busi- 
ness would  be  immensely  increased."^ 

In  May,  1904,  Lord  Stanley,  Postmaster  General, 
said :  "During  the  last  two  years  it  has  been  necessary 
to  refuse  to  provide  long  telephone  lines  between 
London  and  places  such  as  Manchester,  Liverpool  and 

Telephone  Trunk  Wires 

TkT:i^o ««  Capital 

Circuits       v/ire         Expenditure  Calls  Revenue 

1897-98 877  55,721  5,928,000  5,888,000  670,300 

1905-06 1,755         128,063        14,488,000        17.974,039       2,145.575 

^  The  Electrician:  November  16,  1900. 

^The  Electrician  :  February  22  and  April  5,  1901. 


70  THE    TELEPHONE   IN    GREAT    BRITAIN 

Glasgow,  for  private  use,  owing  to  the  difficulty  of 
finding  space  on  existing  routes  even  for  the  new  wires 
required  for  the  public  service.  Estimates  of  the  cost 
of  constructing  new  routes  for  additional  wires  have 
been  prepared,  and  I  am  considering  whether  it  will  be 
possible  to  supply  long-distance  private  telephone  lines 
to  all  applicants  for  them."^ 

In  November,  1906,  Mr.  Stewart  Jones,  representing 
the  Post  Office  Department,  said  to  the  complaining 
merchants  of  Newcastle  that  the  Post  Office  had  just 
spent  $1,750,000  in  building  telephone  trunk  lines,  and 
that  it  was  engaged  in  spending  a  further  sum  of 
$750,000.  "Newcastle  had  got  its  share  of  that,  but 
he  was  perfectly  aware  that  the  trunk  lines  in  [to] 
Newcastle  were  inadequate  in  certain  cases.  But  it  was 
very  difficult,  in  such  a  rapidly  growing  service,  to  keep 
the  supply  up  to  the  demand.  .  .  .  He  knew  that  the 
trunk  lines  were  in  some  cases  inadequate."^ 

The  inconvenience  resulting  to  the  public  from  the 
State's  purchase  of  the  telephone  trunk  lines,  has  not 
been  confined  to  inconvenience  resulting  from  lack  of 
trunk  line  facilities.  Before  a  Select  Committee  of  1 905, 
Mr.  H.  Babington  Smith,  Permanent  Secretary  to  the 
Post  Office  since  1903,  testified  that  the  break  of  con- 
tinuity of  control  resulting  from  the  separate  operation 
of  the  local  telephone  systems  and  the  trunk  lines  made 
it  extremely  difficult,  and  at  times  impossible,  to  allo- 

^  Hansard's  Parliamentary  Debates:  May  i8,   1904;  p.  165. 
'''The  Electrician;  November   16,   1906. 


ADEQUATE  SERVICE  NOT   PROVIDED  71 

cate  the  responsibility  for  delays  in  the  use  of  the  trunk 
lines.  His  testimony  was  endorsed  by  Mr.  John  Gavey, 
since  1902  Engineer-in-Chief  to  the  Post  Office.* 

The  failure  of  the  Government  to  provide  adequate 
trunk  line  facilities  is  not  due  exclusively  to  the  Treas- 
ury's unwillingness  to  build  lines  for  which  the  financial 
outlook  is  in  any  way  doubtful.  It  is  due  in  part  to  the 
inability  of  the  British  Government  properly  to  hus- 
band its  resources ;  to  practice  economy  where  prudence 

would  counsel  economy,  and  to  practice 
Popular  Gov-         ,.,        ,  ,.  ,  ,       . 

ernments  cannot    liberal  expenditure  where  busmess  con- 

Husband  their  siderations  would  urge  it.  The  British 
Government  each  year  wastes  a  number 
of  millions  of  dollars  in  paying  more  than  the  market 
rate  of  wages  and  salaries  to  the  huge  army  of  postal 
and  telegraph  employees,  who  are  redundant  in  number 
because  they  have  secured  recognition  of  the  demand 
that  once  a  man  has  landed  himself  on  the  State's  pay- 
roll, he  has  practically  a  free-hold  title  to  employment 
for  life,  irrespective  of  his  fitness,  and  irrespective  of 
the  ups  and  downs  in  the  volume  of  the  State's  postal 
and  telegraph  business;  who  refuse  to  submit  to  the 
enforcement  of  the  rigorous  standards  of  discipline 
to  which  must  submit  all  persons  not  in  the  public  serv- 
ice; who  insist  upon  promotion  being  made  largely  in 
accordance  with  seniority  rather  than  efficiency.  The 
Government  wastes  annually  a  number  of  millions  of 

^Report  from   the  Select  Committee  on  Post  OfUce   {Telephone 
Agreement),  1905  ;  q.  185,  186  and  413. 


rz 


THE   TELEPHONE   IN    GREAT   BRITAIN 


tlollars  by  carrying  at  an  average  of  4  cents  for  100 
words  the  telegraphic  correspondence  of  the  newspaper 
press:  and  at  unprofitable  rates  the  telegrams  sent  by 
the  public  at  large  between  distant  points  or  to  and 
from  the  rural  districts.  In  other  words,  in  Great 
Britain,  as  elsewhere,  government  is  carried  on  to  a 
ccjnsiderable  extent  by  means  of  log-rolling  and  the 
bribery  of  constituencies  out  of  the  public  purse.  Those 
])ractices  consume  so  much  money  that  no  Government 
has  as  yet  been  able  to  follow  them  and  at  the  same  time 
find  the  money  required  for  the  proper  conduct  of  such 
commercial  ventures  as  it  may  have  undertaken.  By 
the  time  the  British  Government  has  paid  the  annual 
bill  of  bribing  the  newspaper  press,  the  civil  servants, 
and  the  persons  who  send  telegrams  between  distant 
points,  or  to  and  from  the  rural  regions,  it  has  exhausted 
its  resources.  Therefore  it  is  obliged  to  practice  a 
niggardly  economy  in  its  expenditure  upon  the  tele- 
])hone  trunk  lines,  a  purely  commercial  venture. 

In  this  respect  the  experience  of  Great  Britain  has 
been  a  repetition  of  the  experience  of  every  country  with 
a  legislature  elected  by  manhood  suffrage  that  has 
branched  out  upon  industrial  ventures.  In  France,  in 

Great  Britain's  ^^""^  P^"^^^  ^^O"""  ^^78  to  1885,  log-roll- 
Experiencc  is  ing  and  the  bribing  of  classes  wrecked 
Typical  ^i^g  g^Q^.^g  Qf  ^j^g  5^^^^  ^^  l^^^j^^^  ^p  g 

national  system  of  State  railways.  In  Italy,  in  the 
period  from  1878  to  1885,  the  same  practices  wrecked 
the  experiment   of   State  railways.      In  the  principal 


ADEQUATE  SERVICE  NOT  PROVIDED  73 

Australian  Colonies.  Victoria  and  New  South  Wales, 
the  same  practices  have  resulted  in  burdens  upon  the 
taxpayers  and  the  producers  which  are  so  severe  that 
the  development  of  the  Colonies  has  been  arrested.  In 
Prussia,  whose  government  is  not  democratic,  but  is  an 
enlightened  despotism  in  the  guise  of  a  constitutional 
monarchy,  the  practices  of  log-rolling  and  of  bribing 
constituencies  have  been  avoided  so  far  as  the  expendi- 
ture of  the  public  funds  is  concerned.  And  yet,  the 
Prussian  Government  has  been  far  from  successful  in 
financing  its  great  industrial  venture,  the  State  railways. 
It  has  made  surplus  earnings  derived  from  the  State 
railways  the  keystone  of  the  national  budget,  so  that  it 
would  be  necessary  practically  to  double  the  direct  tax- 
ation, were  the  railway  surplus  to  disappear.  The  re- 
sult has  been  that  the  Prussian  Government  time  and 
again  has  used  so  large  a  part  of  the  railway  surplus 
for  defraying  the  current  expenses  of  the  State,  that  it 
has  been  unable  to  spend  upon  the  railways  themselves 
the  enormous  sums  demanded  by  the  growth  of  trade, 
industry  and  population.^  In  short,  so  far.  no  nation 
has  succeeded  in  properly  financing  a  great  industrial 
undertaking  with  the  success  that  has  characterized  the 
operations  of  the  great  captains  of  industry  of  the 
United  States,  Great  Britain  and  Germany.  The  whole 
nature  of  the  great  game  of  politics  is  such  as  to  in- 
capacitate for  the  conduct  of  great  industrial  ventures 
the  persons  engaged  in  the  conduct  of  that  game. 

*  Compare    H.    R.    Meyer:     Government    Regulation    of    Railway 
Rates,  Chapter  III. 


CHAPTER  VI 

THE  REFUSAL  OF  WAY-LEAVES 

The  telephone  licenses  of  1881  and  1884  merely  waived  the 
Postmaster  General's  monopoly  rights;  they  conferred  no  power 
to  erect  poles  in  the  streets,  or  to  lay  wires  underground ;  so 
that,  in  cities  and  towns,  the  telephone  wires  had  to  be  strung 
from  house-top  to  house-top.  As  late  as  1898,  no  less  than 
120,000  miles  of  wire,  out  of  a  total  of  143,000  miles  of  wire, 
were  so  strung.  The  system  of  house-top  wires  rendered  it 
impossible  to  provide  a  telephone  service  satisfactory  in  quality 
or  adequate  in  extent ;  and  it  delayed  for  years  the  replacement 
of  the  earth-return  circuit  by  the  metallic  circuit.  The  National 
Telephone  Company  in  1884,  1885,  1888,  1892,  1893  and  1899 
asked  Parliament  for  statutory  power  to  use  the  streets,  but 
the  Postmaster  General  invariably  refused  to  permit  the  Com- 
pany's Bills  to  proceed,  though  Parliamentary  Select  Committees 
in  1885  and  1893  had  urged  strongly  that  the  telephone  com- 
panies be  given  adequate  powers  of  way-leave.  Down  to  1892, 
the  Postmaster  General,  representing  the  Government  of  the  day, 
was  influenced  solely  by  the  desire  to  protect  the  State  Tele- 
graphs by  hampering  the  telephone.  In  the  latter  year,  the 
Government  became  willing  to  give  the  National  Telephone 
Company  certain  moderate  powers  of  way-leave ;  but  it  had  to 
bow  to  the  will  of  the  Association  of  Municipal  Corporations, 
and  give  the  local  authorities  the  power  to  veto  the  exercise 
of  any  powers  of  way-leave  that  the  Postmaster  General  at  any 
time  might  confer  upon  the  National  Telephone  Company.  The 
local  authorities  demanded  the  power  of  veto,  not  in  order  that 
they  might  regulate  the  time  and  manner  of  opening  the  streets, 
but  in  order  that  they  might  exact  payment  for  the  use  of  the 
streets,  as  well  as  prescribe  the  charges  which  the  National  Tele- 
phone Company  should  make  to  its  subscribers.  The  Association 
of  Municipal  Corporations  had  demanded  that  Parliament  itself 

74 


THE  REFUSAL  OF  WAY-LEAVES  75 

fix  those  charges,  as  well  as  prescribe  the  maximum  dividends 
which  the  Company  might  pay;  but  the  Government  had  rejected 
that  demand,  lest  Parliament  should  prescribe  unremunerative 
rates.  The  Government  had  an  interest  in  the  telephone  charges 
being  kept  on  a  remunerative  basis,  for  it  contemplated  taking 
over  the  entire  telephone  business  on  December  31,  191 1.  The 
Government  also  received  each  year  10  por  cent,  of  the  National 
Telephone  Company's  gross  receipts  by  way  of  royalty.  Man- 
chester, in  1894,  was  the  first  city  to  give  the  National  Telephone 
Company  permission  to  use  the  streets ;  and  as  late  as  September, 
1897,  only  fifty-nine  cities  in  the  United  Kingdom  had  followed 
Manchester's  example. 

The  telephone  licenses  issued  in  1881  and  1884 
merely  enabled  the  telephone  companies  *''to  convey 
messages  for  payment,  without  infringing  the  exclusive 
right  of  the  Postmaster  General  to  convey  such  mes- 
sages ;"^  they  conferred  upon  the  companies  no  powers 
of  way-leave."  On  the  other  hand,  unless  a  company 
had  obtained  from  Parliament  statutory  way-leave 
powers,  no  local  authority  had  the  lawful  right  to  allow 
such  a  company  to  break  up  the  streets  for  the  purpose 
of  laying  wires  under  the  ground.^  The  local  authori- 
ties could  give  companies  or  persons  power  to  place 

Nature  of  the  P^^^^  ^"^^  ^^^''^^  ^^°"^  P"'^^'^  thorough- 
Telephone  fares;    but  for  practical  purposes  that 

Licenses  power  availed  little,  since,  without  the 

consent  of  the  occupier,  no  pole  may  be  erected  within 

^ Hdnsard's  Parliamentary  Debates;  August  12,  1881,  p.  1712. 
and  July  8,  p.  362,  Sir  Henry  James,  Attorney  General. 

^Report  from  the  Select  Committee  on  1  clephones.  1898;  q.  239 
to   241,    Sir   Robert   Hunter,    Solicitor   to   Post   Office. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  239 
to  241,  Sir  Robert  Hunter,  Solicitor  to  Post  Office,  cites  The  Queen 
versus  The  United  Kingdom  Telegraph  Company,  2  F.  &  F.  73 : 
6  L.  T.  (N.  S.)  378. 


76  THE   TELEPHONE    IN    GREAT    BRITAIN 

30  feet  of  a  building.^  Practically,  therefore,  under 
the  licenses  of  1881  and  1884,  in  cities  and  towns, 
telephone  wires  had  to  be  carried  from  point  to  point 
by  means  of  attachments  to  houses,  or  by  means  of  poles 
erected  upon  private  property.  Wires  could  be  carried 
in  that  way  even  without  the  consent  of  the  local  au- 
thorities, the  Court  of  First  Instance  as  well  as  the  Court 
of  Appeal  having  held,  in  Wadsworth  District  Board 
of  Works  versus  The  United  Telephone  Company^ 
that  the  road  authority  had  no  veto  upon  the  erection 
of  a  wire  across  the  road,  provided  the  wire  was  sus- 
pended from  supports  which  were  not  upon  the  road, 
and  crossed  the  road  at  such  a  height  as  to  be  above 
the  area  of  the  ordinary  use  of  the  road,  and  provided 
that  it  did  not  constitute  a  nuisance  by  being  a  probable 
source  of  danger  or  damage.^ 

Under  the  licenses  of  1881  and  1884,  the  telephone 

companies  depended  all  but  exclusively  upon  private 

rights  of  way  obtained  from  the  owners 

Eighty-four  ,  •  r        •      i.  i.  a 

per  cent  of  ^      occupiers  of  private  property.     As 

the  Telephone       late   as    1 898,   Mr.   W.    E.   L.    Gaine, 

Wires  exist  on  General  Manager  National  Telephone 
Sufferance 

Company,  testified  as  follows:  "I  think 

we  have  in  round  numbers  143,000  miles  of  wire  in 

^Hansard's  Parliamentary  Debates;  July  8,  1881,  p.  362,  Sir 
Henry  James,  Attorney-General ;  and  Report  of  Committee  on  Tele- 
phone and  Telegraph  Wires.  1885;  q.  4  et  passim,  Sir  Robert 
Hunter,    Solicitor   to    Post    Office. 

^13  Queen's  Bench   Division,  p.  904. 

^Report  of  Committee  on  Telephone  and  Telegraph  Wires, 
1885  ;  q.  1  et  passim.  Sir  Robert  Hunter.  Solicitor  to  Post 
Office. 


THE  REFUSAL  OF  WAY-LEAVES  77 

this  country,  thereof  I  dare  venture  to  say  120,000 
miles  are  absohitely  on  sufferance,  i.e.,  on  short  notice 
[of  removal].  The  balance,  23,000  miles,  has  been  put 
underground  within  the  last  two  years  by  arrangement 
with  local  authorities."^ 

In  order  to  obtain  private  way-leaves,  the  National 
Telephone  Company  inserted  the  following  clause  in  all 
contracts  with  its  subscribers.  "The  subscriber  will 
grant  the  company  free  of  charge  every  facility  in  his 
power  for  the  erection,  examination,  maintenance,  and 
removal  of  poles,  wires,  etc.,  for  running  his  own  wire, 
and  also  such  wires  of  other  subscribers  to  the  com- 
pany's system,  whether  exchange  or  private,  as  the 
company  may  from  time  to  time  require,  and  will  per- 
mit the  company  and  its  servants,  at  all  reasonable 
times,  to  have  free  access  to  the  particular  premises 
herein  referred  to,  and  to  all  other  premises  under  the 
subscriber's  control  for  all  or  any  of  the  purposes  afore- 
said." .  .  .  This  clause  covered  the  erection  of  "only 
a  moderate  number  of  wires ;"  when  there  was  in- 
volved the  right  to  erect  a  large  number  of  wires,  re- 
quiring the  erection  of  a  pole  or  poles  upon  the  house- 
top or  upon  the  land  adjoining  the  house,  the  company 
made  special  bargains.^  All  of  these  contracts  w^ere 
terminable  on  short  notice  from  the  subscriber,  usually 
six  months'  notice.    The  protection  of  the  company  lay 

^Report  from  the  Select  Committee  on  Telephones,  1898:  q. 
7570   and   7572. 

-Report  from  the  Select  Committee  on  Telephones,  1898:  q.  5963 
and  6673,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company. 


78  THE   TELEPHONE    IN    GREAT    BRITAIN 

in  the  fact  that  if  the  subscriber  terminated  the  contract, 
he  lost  the  use  of  the  telephone.  In  1898,  Mr.  J.  S. 
Forbes,  Chairman  National  Telephone  Company,  testi- 
fied that  in  Metropolitan  London  his  Company  was  pay- 
ing for  private  way-leaves,  on  an  average  $7  per 
subscriber  per  year,  the  average  subscription  charge  per 
telephone  being  $71,44.  He  added  that  the  Post  Office 
royalty  of  10  per  cent,  of  the  gross  receipts  was  $6  per 
subscriber;  and  that  his  Company  would  "knock  $15 
off  its  subscription  charges,"  if  the  Government  would 
give  it  way-leave  powers  and  remove  the  royalty.* 

The  lack  of  way-leave  powers  also  compelled  the 
Company  frequently  to  follow  circuitous  routes,  and  to 
multiply  the  number  of  exchanges.  The  multiplication 
of  exchanges,  in  turn,  not  only  caused  increased  ex- 
penditure, but  also  augumented  the  chances  of  delay 

and    error    in    connecting    subscribers 
Lack  of  Way-  ,         .  ,      ,  f,  ,        , 

leaves  causes        who  Wished  to  converse  with  each  other. 

Waste  and  In  the  year   1885,   the   Company  was 

"  ^  obliged    to    operate    in     Metropolitan 

London,  for  the  benefit  of  less  than  5,000  subscribers, 

no  less  than  18  central  exchanges.     At  that  time  the 

Company  was  unable  to  reach  Covent  Garden,  Middle 

and  Inner  Temple   [the  offices  of  the  barristers],  St. 

Giles,  Battersea,  Bayswater  and  East  Greenwich."     In 

1893,  Mr.  T.  S.  Forbes,  Chairman  National  Telephone 


''^  Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6570, 
6551    and    6640. 

^Report  of  Select  Committtee  on  Telephone  and  Telegraph  Wires, 
188s  ;  q.  373  to  388,  499,  SOS  and  s8o,  Mr.  J.  B,  Morgan,  Manag- 
ing Director  United  Telephone  Company. 


THE  REFUSAL  OF  WAY-LEAVES  7!) 

Company,  testified  that  the  multiphcity  of  exclianges 
necessitated  by  the  necessity  of  going  around  estates 
whose  owners  would  not  give  way-leaves,  increased  the 
delays  and  errors  in  connecting  subscribers,  and  ac- 
counted in  part  for  the  unsatisfactory  service  in  Metro- 
politan London.^  In  1898,  Mr.  W.  E.  L.  Gaine,  Gen- 
eral Manager  National  Telephone  Company,  testified 
that  if  the  Company  had  adequate  way-leaves,  it  would 
be  operating  in  the  City  of  London  [area  one  square 
mile],  not  four  exchanges,  but  one  exchange.  The 
Company  never  had  opened  a  new  exchange  near  an 
established  one  for  the  purpose  of  relieving  pressure, 
but  always  because  of  the  way-leave  difficulty.  He 
added :  "...  there  are  several  hundreds  of  people 
who  have  signed  contracts  in  [Metropolitan]  London 
that  (whether  we  will  or  not,  no  question  of  expense) 
we  are  absolutely  and  physically  unable  to  connect, 
owing  to  the  attitude  of  the  local  authorities."^ 

Mr.  Fortescue  Flannery,  M.  P.,  laid  before  the  Select 
Committee  of  1898  his  grievance,  which  was,  that  the 
National  Telephone  Company  had  kept  him  waiting 
over  three  years  after  making  a  contract^  to  give  him  a 
telephone  in  his  house,  which  was  within  about  a  mile  of 
the  Company's  Streatham  exchange.  It  would  have  cost 
about  $150  to  run  the  wire ;  but  the  Company  could  not 

'  Report  from  Joint  Committee  on  Electric  Po7vcrs  (Protective 
Clauses),    1893;    q.  1376    and    1380. 

'^Report  from  the  Select  Committee  on  Telephones  1898;  q.  7408, 
7413   and   7303- 

'All  contracts  contain  the  provision  that  they  are  subject  to 
the  Company  being  able  to  obtain  and  maintain  all  proper  way-leaves. 


80  THE   TELEPHONE    IN    GREAT    BRITAIN 

get  the  necessary  way-leaves.  The  Company  finally 
connected  Mr.  Flannery  with  its  Sydenham  exchange, 
distant  nearly  four  miles  from  the  subscriber's  house. 
Since  it  would  have  cost  upward  of  $500  to  run  a  single 
wire  for  Mr.  Flannery  to  the  Sydenham  exchange,  the 
Company  waited  until  it  had  obtained  a  sufficient  num- 
ber of  subscribers  to  warrant  the  erecting  of  wires  nearly 
four  miles  long  to  the  Sydenham  exchange,  the  opera- 
tion involving  the  putting  up  of  "costly  ornamental 
poles"  along  the  public  road  of  Croydon.^ 

Finally,  the  lack  of  way-leave  powers  delayed  for 
years  the  introduction  of  the  so-called  metallic  circuit, 
or  twin-wire  system,  which  alone  gives  a  satisfactory 
service  in  large  cities.  That  system  was  introduced  in 
Introduction  of  ^^^  ^ork  City  in  1887,  or  thereabout.^ 
Metallic  Circuit  Before  the  Select  Committee  of  1893, 
Delayed  y^^    j^    Sinclair,  Engineer-in-Chief  to 

the  National  Telephone  Company,  explained  why  it 
was  extremely  difficult,  in  the  absence  of  way-leave 
powers,  to  replace  the  single-wire  system  with  the  twin- 
wire  system.  He  stated  that  many  householders  who 
had  given  permission  to  erect  on  the  roof-tops  standards 
carrying  single  wires,  would  not  permit  the  erection  of 
the  new  standards  required  for  the  double  wires.  An- 
other difficulty  was  the  impossibility  of  estimating  the 


^Report  from  Select  Committee  on  Telephones,  1898;  q.  7268 
to  7270,  Mr.  W.  E.  L.  Gaine ;  and  q.  7220  to  7265,  Mr.  Fortescue 
Flannery,  M.  P. 

^  Glasgozv  Telephone  Inquiry,  1897;  q.  9451,  Mr.  H.  L.  Webb, 
Assistant    General    Manager   New   York   Telephone    Company. 


THE  REFUSAL  OF  WAY-LEAVES  81 

cost  of  the  conversion  to  twin  wires,  since  it  was  impos- 
sible to  estimate  what  it  would  cost  to  get  the  consents 
of  the  householders  to  the  replacement  of  the  existing 
attachments  and  standards  by  stronger  ones.^  The  most 
serious  difficulty  was  the  unwillingness  of  the  National 
Telephone  Company  to  spend  millions  of  dollars  in 
converting  its  overhead  single  w^ires  into  overhead 
twin  wires,  know-ing  that  very  shortly  the  great  bulk 
of  the  overhead  wires  would  have  to  be  put  under  the 
ground.  The  Company,  after  some  three  or  four  years' 
futile  effort  to  get  underground  way-leaves  in  Metro- 
politan London,  in  the  five  or  six  years  ending  with 
1897  spent  $1,500,000  in  converting  a  part  of  its 
Metropolitan  London  system  into  the  twin-wire  system. 
It  then  was  confronted  with  the  probability  of  having 
to  spend  another  $1,500,000  in  the  course  of  the  next 
twelve  months  in  taking  those  wires  down  and  putting 
them  under  the  ground."  There  was  an  obvious  limit 
to  that  kind  of  thing.  As  a  matter  of  self-preservation 
the  Company  might  do  it  in  Metropolitan  London, 
where  certain  statesmen  first  denied  the  Company  way- 
leaves  and  then  roundly  denounced  the  Company  for 
its  inadequate  and  inefficient  service;  but  it  could  not 
do  it  everywhere;  not  that  the  other  large  cities  had 
not  their  share  of  statesmen  patterned  on  the  Metro- 
politan London  model,  but  not  all  cities  had  so  much 

^Report  from  Joint  Committee  on  Electric  Powers  {Protective 
Clauses),  1893;  q.  941   and  1025  to  1027. 

^  Glasgozv  Telephone  Inquiry.  1897;  q.  7431  and  7601,  Mr.  W.  E. 
L.  Gaine,   General   Manager   National   Telephone   Company. 

6 


82  THE   TFXEPHONE    IN    GREAT   BRITAIN 

influence  with  Parliament  as  had  Metropolitan  London. 
Manchester,  in  1894,  was  the  first  city  to  give  the 
National  Telephone  Company  permission  to  put  its 
wires  under  the  street.  There  it  cost  upward  of 
$400,000  to  replace  the  overhead  single  wire  by  the 
underground  twin  wire.^  In  September,  1897,  only 
sixty  cities  in  the  entire  United  Kingdom  had  given 
the  National  Telephone  Company  underground  way- 
leaves."  Not  until  1898-99,  were  such  way-lea ve9' 
given  on  any  considerable  scale.  In  the  meantime,  the 
Company  not  only  was  prevented  from  introducing  the 
twin-wire  circuit ;  but  it  also  was  compelled  to  go  on 
erecting  overhead  wires,  knowing  that  practically  every 
one  of  those  wires  ultimately  would  have  to  be  taken 
down  at  practically  a  total  loss  of  the  capital  invested 
in  them. 

The  National  Telephone  Company  lodged  in  Parlia- 
ment Bills  asking  for  way-leaves,  in  the  years  1884, 
1885.  1888,  1892  and  1893  '-  bi^^t  the  Governments  of  the 
day  refused  to  allow  any  of  those  Bills  to  proceed,^  so 
that  the  merits  of  none  of  them  were  discussed  in  the 
House  of  Commons.  The  Governments  of  the  day  re- 
fused to  allow  the  Bills  lodged  by  the  National  Tele- 
phone Company  to  proceed,  though  the  Select  Com- 

^  Glasgow  Telephone  Inquiry,  1897;  Q-  7422,  Mr,  W.  E.  L.  Gaine, 
General   Manager   National   Telephone   Company. 

"Glasgow    Telephone    Inquiry,     1897;     q.    4189,    4327    and    4329. 

^Report  from  the  Select  Committee  on  Telephones,  1898,  q.  8814, 
Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company ;  and 
q.  2S4  and  6909,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 


THE  REFUSAL  OF  WAY-LEAVES  83 

rnittee  on  Telephone  and  Telegraph  Wires,  1885,'  had 
recommended  that  the  telephone  companies  "should 
have  the  same  powers  with  regard  to  the  running  of 
their  wires  as  the  Postmaster  General ;  subject,  how- 
ever, to  the  proviso  that  the  wires  of  the  Company 
should  not  be  permitted  to  interfere  with  those  re- 
quired for  the  general  public  telegraphic  service  by  the 
The  Govern-  Postmaster  General."     The  Committee 

ment  refuses  also  had  recommended  a  considerable 
Way-leaves  enlargement  of  the  Powers  of  the  Post- 

master General  and  his  licensees,  the  telephone  com- 
panies. It  had  recommended  "especially"  the  repeal 
of  "the  provision  requiring  the  Postmaster  General  to 
obtain  the  consent  of  the  occupier  of  every  dwelling- 
house  within  30  feet  of  a  pole."  The  Committee  had 
concluded  its  Report  with  the  words :  "Your  Com- 
mittee believe  that  such  regulations  as  they  have  recom- 
mended will  be  abundantly  sufficient  to  protect  the 
public  from  inconvenience  and  danger,  however  wide 
may  be  the  extension  of  the  telephonic  system.  At  the 
same  time  they  believe  that  nothing  which  they  have 
recommended  will  impede  the  natural  development  of 

'  The  Government  of  the  day  seems  to  have  accepted  the  appoint- 
ment of  this  committee  only  as  a  necessary  evil,  as  it  were.  Before 
the  Committee  Mr.  Robert  Hunter,  Solicitor  to  Post  Office,  testified 
as  follows  (q.  ^7)  :  "I  would  preface  what  I  have  to  state  .... 
by  saying  that  the  Postmaster  General  was  not  intending  to  apply 
to  Parliament  for  any  alteration  of  the  law.  The  whole  of  this 
inquiry  has  been  caused  by  the  state  of  the  law  with  respect  to 
telephone  companies,  and  the  conflict  of  opinion  between  them  and 
the  local  authorities.  The  position  of  the  Post  Office  is,  that  we 
do  not  wish  to  ask  for  any  alteration  of  the  law,  but,  if  there  is  to 
be  an  alteration  of  the  law,  then  there  are  certain  things  which  we 
think  it  is  desirable  should  be  done."  .... 


84  THE   TELEPHONE    IN    GREAT    BRITAIN 

an  invention  the  great  and  increasing  utility  of  which 
they  fully  recognize."^ 

In  1885  the  Postmaster  General  had  the  power  to 
lay  wires  under  the  streets  in  cities.  Against  the  re- 
fusal of  the  local  authority  to  give  its  consent,  he  had 
appeals,  first  to  a  stipendiary  magistrate  or  to  a  county 
court  judge,  and  then  to  the  Railway  and  Canal  Com- 
missioners. The  recommendation  of  the  Committee  of 
1885  had  included  that  power  and  those  rights  of 
appeal.  But  in  1885  the  art  of  transmitting  electrical 
energy  by  wire  had  not  reached  such  a  state  of  perfec- 
tion as  to  make  it  commercially  feasible  to  lay  telephone 
wires  of  any  length  under  the  ground  f  and  there- 
fore the  Committee  had  recommended  "that  the  erec- 
tion of  overhead  wires  should  be  continued,  subject  to 
proper  regulation  and  control."  It  had  been  of  opinion 
that  it  would  be  inadvisable  to  compel  the  companies 
to  put  their  wires  under  the  groimd. 

The  first  Parliamentary  Committee  that  considered 
the  question  of  telephone  wires  after  it  had  become  com- 
mercially feasible  to  lay  such  wires  under  the  ground, 
reported,  in  1893,  "that  it  is  desirable  in  every  way 
to  facilitate  the  use  of  complete  insulated  metallic  cir- 
cuits for  telephones,  and  for  this  end  they  recommend 


*  Report  from  the  Select  Committee  on  Telephone  and  Telegraph 
Wires,   1885. 

-  Report  from  the  Select  Committee  on  Telephone  and  Telegraph 
Wires,  1885;  q.  312,  212  and  258,  Mr.  Edward  Graves,  Enpineer- 
in-Chief   to   Post   Office. 


THE  REFUSAL  OF  WAY-LEAVES  85 

that  statutory  powers  be  granted  enabling  telephone 
undertakers  to  lay  their  wires  underground."^ 

The  reason  for  the  Government's  persistent  refusal 
to  let  the  telephone  companies  have  independent  statu- 
tory way-leave  powers,  was  the  fear  that  such  powers 
would  make  the  telephone  companies  too  formidable 
competitors  of  the  Post  Office  Telegraphs.  That  reason 
was  specifically  given  in  March,  1892,  by  the  Post- 
master General,  Sir  James  Fergusson.  Upon  that  oc- 
casion, Sir  James  Fergusson,  acting  on  behalf  of  the 
Government,  defeated  the  Motion  for  the  Second  Read- 
ing of  the  New  Telephone  Company's  Bill  for  way- 

rr,     r-  leave  powers.    He  said  :   "The  Bill  now 

i  ne  Govern-  '- 

ment  fears  the  before  the  House  is  one  which  in  itself 
Telephone  jg  moderate  in  character.    It  really  seeks 

to  obtain  for  the  New  Telephone  Company  statutory 
powers  similar  to  those  provided  for  the  Post  Office  by 
the  Act  of  1863,  except  in  one  particular.  I  do  not 
know  that  the  powers  asked  for  would  be  found  ex- 
cessive if  it  were  desired  by  Parliament  to  place  a 
private  telephone  company  in  the  possession  of  separate 
statutory  powers.  But  those  have  never  hitherto  been 
given  in  telephonic  business.  Thai  business  is  in  a  very 
different  position  to  gas,  electric  lighting  and  water 
undertakings,  because  none  of  these  trench  upon  or 
touch  the  prerogatives  of  the  Crown.     It  has  been  de- 

*  Report  from  the  Joint  Committee  of  the  House  of  Lords  and 
the  House  of  Commons  on  Electric  Powers  (Protective  Clauses), 
1893. 


86  THE   TELEPHONE    IN    GREAT    BRITAIN 

cided  by  a  High  Court  of  Justice  that  telephones  are 
telegraphs,  and  therefore  a  monopoly  of  the  Post  Office, 
and  accordingly  no  separate  power  has  ever  been  con- 
ferred upon  Telephone  Companies,  but  they  have  acted 
under  license  from  the  Postmaster  General.  ...  In 
view  of  what  we  believe  to  be  the  general  opinion, 
and  in  accordance  with  the  constant  policy  of  the  Post 
Office,  it  will  be  my  duty,  on  behalf  of  Her  Majesty's 
Government,  to  oppose  the  Second  Reading  of  this 
Bill,  and  a  fortiori  the  Bill  promoted  by  the  National 
Telephone  Company  .  .  .  which  asks  powers  much 
wider  than  were  ever  asked  by  the  Post  Office.  ...  It 
is  extraordinary  how  local  authorities  and  private  in- 
dividuals can  interrupt  the  making  of  most  moderate 
extensions  [of  the  telephone]  for  months.  I  do  not 
think  I  need  go  further  into  the  matter  just  now,  but  I 
do  not  think  the  House  will  be  prepared  to  establish 
private  companies  in  so  strong  a  position  in  opposition 
to  Government  telegraphs  as  would  be  created  by  this 
Bi]l."i 

Tn  1892,  when  the  Government  began  to  negotiate 
with  the  National  Telephone  Company  for  the  purchase 
of  the  Company's  trunk  lines,  the  Government  held 
out  the  prospect  of  more  adequate  way-leave  powers. 
It  promised  that  the  Postmaster  General,  if  possible, 
should  obtain   from   Parliament  the  powers  that  the 


''■Hansard's  Parliamentary  Debates;  March  22,  1892,  p.  143S ; 
compare  also  Report  from  the  Select  Committee  on  Telephones, 
1898;  q.  254  and  6909,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 


THE  REFUSAL  OF  WAY-LEAVES  87 

Select  Committee  of  1885  had   recommended   Parlia- 
ment  to   confer  upon  the   Postmaster 
The  Government     ^  1         1  1  •     i-  t  .      , 

yields  to  the         <^eneral  and  his  hcensees.    It  promised 

Association  of       also  to  ask  Parliament  to  give  the  Post- 
Municipal  Cor-      ^^^^^^^^  General  authority  to  delegate  to 

porations  .       ,  ^  o 

his  licensees  the  exercise  of  his  statu- 
tory way-leave  powers.^  It  still  remained  unwilling, 
however,  that  the  National  Telephone  Company  should 
receive  way-leave  powers  directly  from  Parliament. 
But  when  the  Government  had  felt  the  pulse  of  the 
House  of  Commons,  it  concluded  not  to  ask  the  House 
to  confer  upon  the  Postmaster  General  the  powers 
which  the  Select  Committee  of  1885  had  recommended 
should  be  conferred  not  only  upon  the  Postmaster 
Geneal,  but  also  upon  his  licensees.^  It  concluded  also, 
to  give  the  local  authorities  an  absolute  veto  upon  the 
exercise  by  the  National  Telephone  Company  of  any 
way-leave  powers  that  the  Postmaster  General  might 
delegate  to  the  Company.  Before  the  Select  Commit- 
tee on  the  Telephone  Service,  1895,  Mr.  H.  E.  Clare, 
Deputy-Town  Clerk  of  Liverpool,  and  Representative 
of  the  Association  of  Municipal  Corporations,  testified 
that  the  absolute  veto  had  been  given  the  local  author- 
ities in  1892  upon  the  request  of  the  Association  of 
Municipal  Corporations.  He  said :  "We  objected  en- 
tirely to  the  principle  of  any  powers  being  conferred  on 

"^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7164 
and  7478,  Mr.  W.  E.  L.  Gaine,  General  Manager  National  Tele- 
phone Company. 

-Report  from  the  Select  Committee  on  Telephones,  1898;  q,  6965, 
Sir  Robert  Hunter,  Solicitor  to  Post  Office. 


88  THE   TELEPHONE    IN    GREAT   BRITAIN 

the  National  Telephone  Company  excepting  by  an  Act 
of  Parliament,  which,  at  the  same  time,  settled  the  re- 
strictions" [that  is,  fixed  the  maximum  price  to  be 
charged  to  subscribers,  as  well  as  the  maximum  divi- 
dend to  be  paid  by  the  Company].  Mr.  Clare  added: 
"We  said:  'Well,  we  do  not  like  it  [the  Bill  of  1892]  ; 
at  the  same  time,  if  you  will  give  us  the  absolute  veto  to 
stop  the  exercise  of  those  powers  we  will  not  ofifer  any 
further  difficulties.'  "^  Mr.  John  Harrison,  Town 
Clerk  of  Leeds,  who  had  been  sent  to  represent,  with 
Mr.  Clare,  the  Association  of  Municipal  Corporations, 
at  the  same  time  testified  that  the  Association  in  ques- 
tion did  not  demand  the  veto  power  for  the  local  auhori- 
ties  in  order  that  those  authorities  might  be  able  to 
regulate  the  time  and  manner  of  breaking  up  the  streets 
Why  Power  ^^^  *^^  hy'mg  of  underground  wires, 

of  Veto  was  but  in  order  that  the  local  authorities 

Demanded  might  be  able  to  exact  payments  for  the 

use  of  the  streets  as  well  as  prescribe  terms  governing 
the  subscription  charges  to  be  made  by  the  National 
Telephone  Company.^ 

The  National  Telephone  Company,  in  1892,  asked 
for  the  right  of  appeal  to  the  Railway  and  Canal  Com- 
missioners, in  case  a  local  authority  should  withhold 
its  consent.  But  that  request  was  denied  upon  the  pro- 
test  of   the   Association    of   Municipal    Corporations, 

*  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895 ;  q-  1420  and   1422. 

^Report  from  the  Select  Committee  on  the  Telephone  Service. 
1895  ;  q.  1496  to  1509,  1572  and  1579. 


THE  REFUSAL  OF  WAY-LEAVES'  89 

though  the  Post  Office  Department  itself  supported 
the  position  taken  by  the  National  Telephone  Company.* 
Under  the  Act  of  1892  the  local  authorities  have 
an  absolute  veto,  and  they  may  make  any  conditions 
they  choose,  including  the  regulation  of  the  prices  to  be 
charged  by  the  National  Telephone  Company  for  the 
use  of  the  telephone.^ 

The  Association  of  Municipal  Corporations  had  de- 
manded that  Parliament  itself  fix  the  maximum  prices 
to  be  charged  for  the  use  of  the  telephone,  as  well  as 
the  maximum  dividend  to  be  declared  by  the  National 
Telephone  Company.  But  that  ♦-equest  the  Government 
refused  to  grant.  The  Government  could  not  forget 
that  in  1883,  the  House  of  Commons,  under  the  leader- 
ship of  Dr.  Cameron,  M.  P.  for  Glasgow,  and  against 
the  protests  of  the  Government  of  the  day,  had  cut 
almost  in  two  the  charges  for  transmitting  telegrams. 
It  was  unwilling  to  give  the  House  of  Commons  the 
power  to  make  unremunerative  the  property  of  the  Na- 
tional Telephone  Company,  for  it  contemplated  pur- 
chasing that  property  in  191 1   at  the  latest^  in  large 

*^  Report  from  the  Select  Committee  on  the  Telegraphs  Bill.  1892; 
testimony  of  Sir  Robert  Hunter,  Solicitor  to  Post  Office,  q.  312, 
316,  318,  333  to  336,  339  and  340. 

*  Report  from  the  Select  Committee  on  Telephones,  1898;  Sir 
Robert  Hunter,  Solicitor  to  Post  Office,  q.  279  to  298,  259  and  265  ; 
and  Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  218,  Mr. 
Arnold  Morley,  Postmaster  General. 

*  Report  from  the  Select  Committee  on  the  Telephone  Sen'ice, 
1895;  q.  103.  The  following  question  and  answer  passed  between 
the  Postmaster  General,  who  was  Chairman  of  the  Committee,  and 
Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office.     "And,  no  doubt. 


90  THE   TELEPHONE    IN    GREAT    BRITAIN 

part  for  the  purpose  of  making  good  the  losses  which  it 
was  suffering  by  reason  of  the  fact  that  the  House  of 
Commons  by  various  acts  of  intervention  had  made  the 
State  telegraphs  unremunerative.^  Again,  the  Govern- 
ment was  immediately  interested  in  the  prosperity  of 
the  National  Telephone  Company,  by  reason  of  the  lo 
per  cent,  of  the  gross  receipts  which  that  company  paid 
the  Post  Office.  These  considerations  underlay  the 
argument  with  which  Sir  Robert  Hunter,  Solicitor  to 
the  Post  Office,  replied  to  the  demand  of  the  Associa- 
tion of  Municipal  Corporations  that  the  House  of  Com- 
mons fix  the  maximum  price  to  be  charged  for  the  use 
of  the  telephone,  as  well  as  the  maximum  dividend  to 
be  paid  by  the  National  Telephone  Company.  Sir 
Robert  Hunter  said :  "But  of  course  it  has  to  be  borne 
in  mind  that  the  commodity  v^^hich  the  telephone  com- 
panies supply  is  really  a  monopoly  of  the  State.  It  is 
the  State  which  has  the  right  to  transmit  telegrams," 
and  these  licensees  are  merely  acting  under  the  authority 
of  the  State ;  and  it  would  be  a  novel  principle  to  say 
that  the  State  should  be  put  under  conditions  of  that 
kind."^ 

The  unqualified  power  of  veto,  by  the  local  authori- 
ties, upon  the  exercise,  by  the  National  Telephone  Com- 

the  taking  over  of  the  trunk  wires  by  the  State  is  a  step  in  the 
direction  of  State  acquisition  of  the  telephones?"  "Yes,  I  think 
that  is  obvious." 

*  Compare  H.   R.   Meyer :     The  British  State  Telegraphs. 

*The   High    Court   of  Justice  had  held   that  telephone   messages 
were  telegrams. 

*  Report  of  the  Select  Committee  on   the  Telegraphs  Bill,   1892; 

q-  342. 


THE  REFUSAL  OF  WAY-LEAVES"  91 

pany.  of  the  way-leave  powers  to  be  delegated  to  that 
Company  by  the  Postmaster  General,  was  conferred 
upon  the  local  authorities  in  1892  in  spite  of  the  dis- 
approval of  the  Post  Office  Department,  and  in  spite  of 
the  fact  that  Parliament,  in  1892,  had  before  it  twenty- 
two  years  of  the  disastrous  working  of  a  similar  power 
of  veto  upon  the  laying  of  tracks  by  companies  for 
street  railway  purposes.^  Parliament,  as  well  as  the 
Government,  in  1892,  bowed  to  the  will  of  the  Associa- 
tion of  Municipal  Corporations,  one  of  the  most  power- 
ful organizations  in  Great  Britain,  existing  for  the 
promotion  of  special  interests  in  contradistinction  to 
national  interests.  Lord  Alverstone,  Lord  Chief 
Justice  of  England,^  in  January,  1903,  spoke  as  fol- 
lows of  the  political  power  of  this  Association :  "He 
wished  to  allude  to  one  part  of  the  sub- 
Justice^on  th  J^^^  which  had  only  been  touched  upon 
Association  of       by   the   author,   but   which   he    [Lord 

Municipal  Alverstonel  as  a  Member  of  the  House 

Corporations 

of  Commons  for  a  great  many  years 

had  frequently  had  pointedly  brought  before  his  notice. 
The  author  had  referred  to  the  Municipal  Corporations 
Association.  Only  those  who  had  been  in  the  House  ol 
Commons  knew  the  really  almost  unfair  weight  and 
power  which  municipal  bodies  had  in  the  House,  be- 
cause, not  only  did  the  local  Member  not  dare  to  resist 

•  H.  R.  Meyer :     Municipal  Ownership  in  Great  Britain. 

'Who's  Who,  1905.  Alverstone,  ist  Baron  (cr.  1900),  Sir  Rich- 
ard Everard  Webster,  Lord  Chief  Justice,  1900;  M.  P.,  Laun- 
cesteon,  1885;  Attorney  General,  1885-86,  1886-92,  and  1895-1900- 
M.  P.  (C),  Isle  of  Wight,  1885-1900. 


92  THE   TELEPHONE    IN    GREAT    BRITAIN 

the  wishes  of  his  local  friends,  but  all  the  municipal 
corporations  acted  together,  and  when  there  had  been 
an  attempt  to  get  statutory  powers  for  private  enter- 
prise which  was  thought  to  conflict  with  the  possibility 
of  municipal  trading  in  a  particular  place,  not  only  was 
the  influence  of  the  municipality  in  that  particular  place 
set  to  work,  but  the  influence,  through  the  Municipal 
Corporations  Association,  of  many  other  municipal 
bodies  which  had  nothing  whatever  to  do  with  the 
particular  scheme.  Without  fear  of  contradiction  he 
could  say  that  the  question  under  those  circumstances 
was  not  fairly  determined  upon  its  merits,  and  was  not 
fairly  discussed.  Being  no  longer  in  politics  he  had  no 
right  to  express  an  opinion  upon  the  merits  of  the  case 
[municipal  trading]  beyond  saying  that  it  was  a  ques- 
tion of  such  vast  importance  that  it  ought  to  be 
thoroughly  understood  and  tested  upon  its  merits  and 
not  dealt  with  by  any  considerations  of  popularity,  pub- 
lic sentiment,  or  anything  of  that  kind."* 

The  Telegraphs  Act,  1892,  received  the  Royal  assent 
in  August,  1892.  Not  until  May,  1894,  did  the  Na- 
tional Telephone  Company  succeed  in  persuading  a 
local  authority  to  consent  to  the  Company  exercising 
the  Postmaster  General's  power  to  open  the  streets  for 
the  purpose  of  laying  telephone  wires  under  the  ground. 
On  that  date  it  made  a  contract  with  Manchester.  In 
February   and   December,    1895,  the   Company  made 

^Journal  of  the  Society  of  Arts;  January  30,   1903. 


THE  REFUSAL  OF  WAY-LEAVES  93 

contracts  with  Norwich  and  Portsmouth  respectively. 
The  Municipali-  ^"  ^^96  it  made  contracts  with  ten 
ties  misuse  the  municipalities;  and  in  September,  1897, 
Power  of  Veto  j^  j^^^  succeeded  in  making  contracts 
for  underground  way-leaves  as  well  as  the  erection  of 
poles  in  the  streets  with  only  sixty  municipalities.^ 
The  reason  for  this  all  but  complete  refusal  of  the  local 
authorities  to  accept  the  Telegraphs  Act,  1892,  is  set 
forth  in  the  following  resolutions,  passed  by  a  Special 
Committee  of  the  Association  of  Municipal  Corpora- 
tions on  March  20,  1895  :  "Resolved  that  the  principles 
involved  in  the  resolution  of  the  Council  of  November 
22,  1894,  should  be  adhered  to,  namely:  'That  in  the 
opinion  of  the  Council  no  powers  should  be  given  to 
any  telephone  company  which  will  enable  them  to  inter- 
fere with  streets  or  with  the  rights  of  individuals  in 
property,  unless  statutory  conditions  and  obligations, 
are,  at  the  same  time,  imposed  on  the  company  for  the 
protection  of  the  public,  particularly  with  regard  to 
maximum  charges,  maximum  dividends,  and  obligation 
to  supply;  that  the  subject  should  be  treated  as  an  im- 
perial, and  not  as  a  local  one ;  and,  therefore,  it  should 
be  urged  in  Parliament  that  so  much  of  the  draft  agree- 
ment between  the  Postmaster  General  and  the  telephone 
companies  as  relates  to  vesting  in  the  companies  the 
way-leave  powers  of  the  Postmaster  General  under  the 
Telegraph  Acts  should  not  be  carried  out.'    That  as  the 

^  Glasgozv   Telephone   hiqiiiry.    1897;    q.    4180,    4327.    4.329.    4651. 
and  pp.  255  to  295. 


94  THE   TELEPHONE    IN    GREAT    BRITAIN 

Postmaster  General  has  refused  to  strike  out  of  the 
agreement  the  provision  objected  to  by  this  Association, 
the  Corporations  be  recommended  to  refuse  their  con- 
sents under  the  Telegraphs  Act,  1892,  to  the  exercise 
by  the  National  Telephone  Company  of  the  power  of 
the  Postmaster  General  under  the  Telegraph  Acts. 
That  the  Town  Clerk  of  Leeds  and  the  Deputy  Town 
Clerk  of  Liverpool  be  asked  to  represent  the  views  of 
this  Committee,  as  expressed  in  the  foregoing  Resolu- 
tion, before  the  Select  Committee."^  In  other  words, 
the  local  authorities  tried  to  force  the  Government  to 
authorize  Parliament  to  fix  maximum  charges  and 
maximum  dividends,  by  withholding  the  consents  with- 
out which  no  telephone  company  could  provide  a  serv- 
ice satisfactory  in  quality  or  adequate  in  extent. 

The  leading  Scotch  cities,  Glasgow  and  Edinburgh, 
refused  to  give  the  National  Telephone  Company  under- 
ground way-leaves  because  they  hoped  to  persuade  the 
Post  Office  to  give  them  a  telephone  license.  They 
Glasgow  and  proposed  then  to  put  in  a  municipal 
Edinburgh  twin-wire  plant  and  to  drive  from  the 

field  the  National  Company,  hampered  by  lack  of  way- 
leave  powers.  Sir  A.  J.  Russell,  a  Town  Councillor 
of  Edinburgh,  as  well  as  a  former  Lord  Provost,  testi- 
fied before  the  Select  Committee  of  1895  that  Edin- 
burgh "would  not  be  willing  that  the  National  Tele- 
phone Company  should  have  the  same  way-leave  powers 

*  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895;  q.  1179,  1212  and  1351,  Mr.  H.  E.  Clare,  Deputy  Town  Clerk 
of  Liverpool. 


THE  REFUSAL  OF  WAY-LEAVES  95 

that  the  City  itself  would  exercise.  That  would  give 
the  municipal  plant  a  decided  advantage  over  the  Na- 
tional Telephone  Company  in  Edinburgh.  .  .  .  We  are 
going  to  put  in  a  cable  tramway.  We  could  lay  the 
telephone  wires  in  the  slot.  We  would  do  so  for  the 
Post  Office,  but  under  no  circumstances  for  the  National 
Telephone  Company,  not  even  if  they  ofYered  to  pay 
handsomely."^  Mr.  Gaine,  General  Manager  National 
Telephone  Company,  commented  as  follows  upon  this 
evidence :  "Well,  the  ethics  of  a  gentleman  who  cannot 
run  his  tramcars  on  a  Sunday"  .  .  .  The  attitude  of 
Glasgow  will  be  described  in  a  subsequent  and  separate 
chapter.  For  the  present,  suffice  it  to  state,  that  ulti- 
mately Glasgow  as  well  as  the  English  city  of  Brighton 
established  municipal  telephone  plants,  put  the  munici- 
pal wires  underground,  and  persistently  refused  to 
permit  the  competing  National  Telephone  Company  to 
put  its  wires  underground.^ 

The  cities  that  gave  the  National  Telephone  Com- 
pany underground  way-leaves,  very  generally  inserted 
one  or  more  of  the  following  conditions.^  Full  rights 
were  reserved  to  grant  similar  powers  to  other  com- 
panies, or  to  lay  underground  wires  for  the  city  itself, 
should  that  body  at  any  time  establish  a  municipal  tele- 

'  Report  from  the  Select  Committee  on  the  Telephone  Sennce, 
1895 ;  q.  992,  993  and  954  to  997. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  874,  Mr.  D.  M.  Stevenson,  Subconvener  of 
the  Glasgow  Telephone  Committee;  and  q.  918,  938,  949  and  963, 
Mr.  H.  Garden,  Alderman  in  Brighton. 

^Glasgow   Telephone  Inquiry,   1897;  pp.  255  to  295. 


96  niK    IKLEPIIONE    IN    GREAT    BRITAIN 

phone  exchange.  The  larger  cities  frequently  reserved 
the  right  to  give  the  National  Telephone  Company  six 
months'  notice  to  remove  its  underground  plant ;  from 
such  notice  there  was  no  appeal.  The  Company  com- 
monly was  put  under  obligation  not  to  raise  its  then 
charges,  to  show  no  preference  or  favor  between  sub- 
scribers, and  to  serve  all  applicants.  The  larger  cities 
frequently  stipulated  that  if  the  Company  should  at  any 
time  reduce  its  charges  in  any  city  of  a  certain  size,  the 
reduction  in  rates  must  be  granted  also  to  those  cities. 
Practically  all  of  the  local  authorities  demanded  annual 
payments  for  the  way-leaves,  some  cities  stipulating  that 
if  the  Company  at  any  time  should  pay  a  higher  rental 
to  any  other  city,  such  increased  rental  must  be  paid 
also  to  them.  Finally,  many  local  authorities  stipulated 
that  they  should  lay  the  wires  underground  for  the 
Company,  which  should  pay  the  local  authority  105 
per  cent,  of  the  cost  of  such  work. 

Though  the  National  Telephone  Company  was  will- 
ing to  accept  the  foregoing  conditions,  some  of  which 
were  decidedly  onerous,  besides  being  designed  to 
secure  objects  other  than  the  protection  of  the  rights 
and  the  convenience  of  the  public  as  users  of  the  streets, 
the  Company  for  a  long  time  was  unable  to  persuade 
any  considerable  number  of  local  authorities  to  give  it 
underground  way-leaves.  In  September,  1897,  the 
National  Telephone  Company  had  secured  underground 
way-leaves  in  only  sixty  cities.  After  that  date  the 
Company  fared  better;  and  in  June,  1899,  it  had  made 


THE  REFUSAL  OF  WAY-LEAVES  '.IT 

contracts   with    114    Enc^lish   municipal   l)oroughs,    13 
Scotch  boroughs,  and  103  Irish  urban  districts.^ 

From  1880  to  1892,  the  British  Government  refused 
to  let  the  telephone  companies  have  any  rights  of  way 
in  the  streets,  lest  the  telephone  should  compete  too 
successfully  with  the  national  telegraphs.  From  1892 
to  1896,  the  municipalities,  acting  under  the  leadership 
of  the  Association  of  Municipal  Corporations,  for  all 
practical  purposes  annulled  the  Act  of 
1892,  which  authorized  the  Postmaster 
General  to  give  the  National  Telephone  Company  rights 
of  way  in  the  public  streets.  The  Association  of  Muni- 
cipal Corporations  for  five  long  years  annulled  an  Act 
of  Parliament,  inflicted  heavy  pecuniary  loss  on  the 
National  Telephone  Company,  and  prevented  the  public 
from  getting  an  efficient  and  adequate  telephone  service, 
simply  because  it  differed  with  the  Government  on  a 
question  of  public  policy,  to-wit,  whether  Parliament 
should  be  permitted  to  regulate  the  charges  of  the  Na- 
tional Telephone  Company.  This  complete  disregard 
of  the  rights  of  the  public  as  the  consumers  of  the  serv- 
ices offered  by  the  National  Telephone  Company  was 
but  one  of  several  instances  of 'disregard  of  public  neces- 
sity and  convenience  shown  by  the  State  and  Munici- 
palities. It  had  its  parallel  in  the  refusal  of  the  several 
successive  Governments  of  the  day  to  amend  the  Tram- 

*  Hansard's    Parliamentary    Debates;    June     20,     1899,    Mr.     C. 
McArthur. 


98  THE  TELEPHONE   IN    GREAT   BRITAIN 

ways  Act,  1870,  and  the  Electric  Lighting  Act,  1888, 
after  experience  had  shown  conclusively  that  public 
necessity  and  convenience  demanded  that  those  acts  be 
amended.  It  had  its  parallel  in  the  exclusion  of  the 
public  central  electric  light  station  from  the  United 
Kingdom  in  the  long  years  from  1882  to  1888,  the 
aforesaid  exclusion  being  the  work  of  the  Municipali- 
ties. It  had  its  parallel  in  the  paralysis — by  the  joint 
action  of  Municipality  and  State — first,  of  the  horse 
street  railway  industry;  and,  subsequently,  of  the 
electric  street  railway  industry.  The  story  of  those 
several  instances  of  disregard  of  the  public  necessity 
and  convenience  has  been  told  elsewhere.^  Suffice  it 
here  to  say  that  it  reads  like  a  travesty  and  takes  the 
mind  back  to  the  Dark  Ages,  or  to  one  of  Gilbert  and 
Sullivan's  comic  operas. 

*  H.    R.    Meyer:     Municipal   Ownership    in    Great   Britain. 


CHAPTER  VII 

THE  DUKE  OF  MARLBOROUGH'S   PROMISE 
AND  RETRACTION 

In  August,  1891,  the  Duke  of  Marlborough,  the  head  of  The 
New  Telephone  Company,  announced  that  his  Company  could 
make  a  profit  of  12  per  cent,  to  15  per  cent,  a  year  while  giving 
Metropolitan  London  an  "unlimited  user"  service  at  $50  or  $60 
a  year.  In  September,  1892,  after  The  New  Telephone  Company 
had  been  absorbed  by  the  National  Telephone  Company,  the 
Duke  of  Marlborough  withdrew  his  previous  statements,  saying 
he  had  "bleated  a  good  deal  about  a  $50  telephone."  The  pro- 
spectus of  the  New  Telephone  Company  had  announced  that  the 
cost  of  installing  telephone  exchanges  would  average  about  $170 
per  subscriber's  wire,  in  the  United  Kingdom  as  a  whole.  At 
that  time  the  National  Telephone  Company's  capitalization  was 
$350  per  telephone  in  use,  of  which  sum  about  $120  was  "water." 
A  large  and  influential  section  of  the  public  refused  to  accept  the 
Duke  of  Marlborough's  retraction ;  and  to  this  day  it  has  insisted 
that  a  telephone  plant  could  be  installed  in  Metropolitan  London 
for  less  than  $200  per  subscriber's  wire,  and  that  an  unlimited 
user  service  could  be  given  for  $50  per  subscriber.  Engineering 
estimates  to  that  effect  were  submitted  to  Parliamentary  Select 
Committees  by  the  London  County  Council  in  1895  and  1898. 
Mr.  W.  H.  Preece,  Engineer-in-Chief  to  Post  Office,  and  Mr.  J.  C. 
Lamb,  Assistant  Secretary  to  Post  Office,  rejected  those  estimates. 
In  March,  1906,  the  Post  Office  Metropolitan  London  telephone 
plant  had  cost  $270  per  telephone  in  use.  The  Post  Office,  upon 
opening  its  Metropolitan  London  telephone  exchange,  in  March, 
1902,  rejected  the  public  request  for  a  $50  unlimited  user  tariff. 
It  established  an  unlimited  service  tariff  of  $85  a  year,  but  only 
in  deference  to  public  opinion.  It  would  have  preferred  to  es- 
tablish the  measured  service  tariff  exclusively,  believing  that  the 
unlimited  service  tariff  is  unsound  in  principle,  and  defensible 
only  on  grounds  of  political  expediency. 

99 


100        THE   TELEPHONE   IN   GREAT   BRITAIN 

The  New  Telephone  Company,  Limited,  had  been 
incorporated  in  1884,  and  had  become  the  possessor  of 
two  Post  Office  telephone  licenses  covering  the  whole 
of  the  United  Kingdom;  but  it  had  not  engaged  in 
actual  work.  So  long  as  the  Bell  and  Edison  patent 
rights  had  been  in  force,  it  had  been  difficult  for  out- 
siders to  obtain  telephone  instruments;  and  after  the 
effluxion  of  those  patent  rights  in  1890  and  1891,  it 
had  been  difficult  for  an  outside  company  to  develop 
local  exchanges,  because  the  National  Telephone  Com- 
pany possessed  the  trunk  lines.^  In  August,  1891,  the 
Duke  of  Marlborough,  the  head  of  the  New  Telephone 
Th  D  k  f  Company,  wrote  to  The  Times  the  first 
Marlborough's  of  a  series  of  open  letters  in  which  he 
Promise  contended  that  his  Company  could  sup- 

ply the  5,000,000  people  living  in  Metropolitan  London 
with  a  metallic,  or  twin-wire  circuit,  telephone  at  the 
rate  of  $50  a  year  per  subscriber — or  at  the  outside  at 
$60  a  year — and  make  a  net  profit  of  12  per  cent,  to 
15  per  cent,  a  year.  He  stated  that  the  Company's  en- 
gineering estimates  had  been  approved  by  Mr.  A.  R. 
Bennett,  formerly  with  the  National  Telephone  Com- 
pany, and  by  Professor  Silvanus  P.  Thompson  and  Mr. 
A.  B.  W.  Kennedy,  Vice-President  of  the  Institution 
of  Mechanical  Engineers.  The  two  latter  gentlemen 
had  had  no  experience  in  telephone  construction  or 
operation.     The  Duke  of  Marlborough  added  that  the 

^Report  of  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  p.  310,  Prospectus  of  the  New  Telephone  Com- 
pany; and  The  Times;  July  28,  1892. 


PROMISE  AND  RETRACTION  101 

New  Telephone  Company  would  apply  to  Parliament 
in  1892  for  underground  way-leaves,  under  the  promise 
to  establish  a  flat  rate  of  $50  a  year.^  At  the  same 
time,  he,  or  his  supporters,  organized  the  Association 
for  the  Protection  of  Telephone  Subscribers  in  London, 
which  soon  acquired  some  1700  members.  In  the  fol- 
lowing year,  1892,  the  New  Telephone  Company  sup- 
ported the  Government's  Bill  to  acquire  the  National 
Telephone  Company's  trunk  lines.^ 

On  July  27,  1892,  it  was  announced  in  The  Times 
that  on  the  following  day  Messrs.  N.  M.  Rothschild  and 
Sons^  would  offer  to  the  public  the  New  Telephone 
Company's  stock — $3,750,000 — and  that  the  National 
Telephone  Company  would  take  one-third  thereof,  or 
The  Duke  of  $1,250,000.  On  September  6,  1892, 
Marlborough's  the  Duke  of  Marlborough  published  in 
Retraction  -phe   Times  a  letter  which   repudiated 

his  previous  statements  that  it  was  possible  to  supply 
telephone  service  in  Metropolitan  London  for  $50  a 
year  per  subscriber.     The  Duke  of  Marlborough  said : 

^  The  Times;  August  29,  and  September  5  and  23,  1891. 

'The  Times;   September  6,    1902. 

^  The  Economist  of  July  30,  1892,  commented  as  follows  upon 
the  connection  of  Messrs.  Rothschild  with  the  New  Telephone 
Company :  "The  promoters  of  the  New  Telephone  Company,  who 
have  during  the  past  week  invited  subscriptions  for  $2,440,000, 
part  of  an  authorized  capital  of  $3,750,000,  have  displayed  a  con- 
siderable amount  of  prudent  forethought  in  securing  the  services 
of  Messrs.  N.  M.  Rothschild  &  Sons  as  their  issuing  agents,  for 
although  the  new  departures  made  by  that  firm  in  recent  years 
have  sometimes  seemed  to  old-fashioned  people  somewhat  venture- 
some, the  reputation  of  the  great  financial  establishment  still  stands 
high  among  the  investing  classes  of  the  country.  We  cannot  believe 
however  that  their  reputation  will  be  enhanced  by  their  connection 
with    the    New    Telephone    Company."  .... 


102        THE   TELEPHONE   IN   GREAT   BRITAIN 

"Mr.  Begg  suggests  tliat  I  have  bleated  a  good  deal 
about  a  $50  telephone.  No  doubt  I  have.  Had  we 
gone  into  rate-cutting  [with  the  National  Telephone 
Company],  as  between  the  two  Companies  we  would 
probably  have  come  to  this  [$50  rate]  ;  and  I  still  main- 
tain that  it  is  quite  possible  that,  as  the  industry  in- 
creases, a  considerably  lower  rate  [than  the  existing 
one]  may  be  practicable.  But  though  I  did  say  a  good 
deal  more  about  a  low^er  rate  [than  the  one  enforced  by 
the  National  Company],  I  said  a  great  deal  also  about 
efficiency.".  .  .  . 

The  New  Telephone  Company  was  absorbed  by  the 
National  Telephone  Company,  which  Company  appears 
to  have  paid  $2,199,480  for  the  New  Telephone  Com- 
pany shares ;  and  to  have  acquired  about 

The  National  £>  o  .1       r 

Telephone  Com-     $900,000  or  $1,200,000  worth  of  prop- 

pany  absorbs  the  erty.^  Upon  the  latter  point,  however, 
New  Telephone     ^^e  evidence   is  fragmentary  and  un- 

Company  . 

satisfactory;   and   it   may   be  that  the 

National  Telephone  Company  acquired  practically  no 

property  through  the  absorption  of  the  New  Telephone 

Company. 

Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office,  in 

1898  expressed  the  belief  that  the  Postmaster  General 

of  1892,  Sir  James  Fergusson,  acting  on  behalf  of  the 

Government,  had  facilitated  the  amalgamation  of  the 

two  Companies.     He  added  that  it  would  have  served 

'  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  :  q.  5104,  5105,  4860  to  4865  and  4809,  Mr.  J.  S.  Forbes,  Chair- 
man National  Telephone  Company. 


PROMISE  AND  RETRACTION  103 

no  purpose  to  purchase  the  National  Company's  trunk 
lines  while  leaving  the  New  Telephone  Company  in 
possession  of  licenses  giving-  that  Company  legal  power 
to  establish  trunk  lines,  as  well  as  local  telephone  ex- 
changes whose  areas  need  not  conform  to  the  areas 
prescribed  for  the  National  Telephone  Company, 
"Therefore,  from  the  point  of  view  of  the  Government 
policy  it  was  necessary  that  an  agreement  should  be 
arrived  at  with  both  groups  of  companies,  and  the 
agreement  could  not  be  arrived  at,  unless  those  two 
groups  put  their  heads  together  and  came  to  an  under- 
standing."^ 

Before  the  Select  Committee  of  1895,  Mr.  J.  S. 
Forbes,  Chairman  National  Telephone  Company,  testi- 
fied that  the  result  of  the  negotiations  between  the 
National  Company  and  the  New  Company  had  been 
to  convince  the  Duke  of  Marlborough  that  the  engi- 
neering estimates  upon  which  the  New  Company  had 
announced  that  it  would  serve  Metropolitan  London 
for  $50  a  year  per  subscriber  were  unreliable  both  as 
regards  the  capital  outlay  and  the  annual  income ;  and 
that  the  ultimate  result  of  competition  between  the  two 
Companies  would  be  consolidation  after  a  large  amount 
of  capital  had  been  wasted  through  duplication  of 
plant.2 

^Report  from  the  Select  Commitice  on  Telephones,  1898;  q.  576 
to  580,  and  1 1 39  to  1140. 

*  Report  from  the  Select  Committee  X>n  the  Telephone  Service 
1895;   q.  4503  to  4527,   4865    and  4421. 


104        THE   TELEPHONE    IN    GREAT    BRITAIN 

H'he  j)rospcctus  of  the  New  Telei)lione  Company  had 
promised  a  return  of  12  per  cent,  a  year  upon  an  invest- 
ment of  $3,750,000;  which  investment  was  to  provide: 
in  Metropolitan  London,  a  metalHc  circuit  telephone 
plant  which  would  accommodate  10,000  subscribers,  be- 
sides having  switchboards  and  other  exchange  appara- 
tus sufficient  for  25,000  subscribers;  and  inJ:he  prov- 
inces a  number  of  metallic  circuit  telephone  exchanges 
with  upward  of  12,000  subscribers,  and  400  public 
pay  stations.  In  other  words,  the  prospectus  had  esti- 
mated the  cost  of  installing  telephone  exchanges  in  the 
United  Kingdom  as  a  whole  at  about  $170  per  sub- 
scriber. At  that  time  the  capitalization  of  the  National 
Telephone  Company  was  about  $350  per  telephone  in 
use,  of  which  sum  about  $120  was  "water."^ 

A  large  and  influential  section  of  the  public,  includ- 
ing the  London  County  Council  and  the  Corporation 
of  the  City  of  London,  never  have  accepted  the  Duke 
of  Marlborough's  retraction.  From 
The  Aftermath  jg^^  down  to  the  present  moment,  they 
have  insisted  that  but  for  the  "water"  in  the  capitaliza- 
tion of  the  National  Telephone  Company,  the  National 
Telephone  Company  would  have  been  able  to  make  a 
reasonable  profit  while  giving  Metropolitan  London  a 
rate  of  $50  a  year  for  unlimited  service.  On  the  other 
hand,  the  net  earnings  of  the  Company  have  been  suffi- 
cient to  pay  upon  the  capital  actually  invested  an  aver- 

'  Report  of  The  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  p.  248;  and  The  Electrician;  April  5,   1900. 


PROMISE  AND  RETRACTION  105 

age  annual  return  of  8,66  per  cent,  in  the  years  1892 
to  1897;  and  7.98  per  cent,  in  the  years  1898  to  1904. 
The  returns  actually  distributed  among  the  holders  of 
the  Company's  securities  have  been  less  than  the  fore- 
going figures  would  indicate,  for  the  Company  accumu- 
lated in  the  years  1892  to  1904  a  surplus  of  $8,092,050. 
But  even  if  the  whole  of  the  net  earnings  had  been  dis- 
tributed among  the  security  holders,  one  could  not  say 
that  the  latter  had  obtained  an  excessive  return. 

In  1895,  the  London  County  Council  submitted  to 
the  Select  Committee  on  the  Telephone  Service  engi- 
neering estimates  prepared  independently  by  Mr.  John 
L.  Newland  and  Sir  Alexander  Binnie.  Mr.  Newland 
had  been  responsible  for  the  New  Telephone  Company's 
estimate  of  1892;  and  he  had  at  one  time  been  in  the 
service  of  the  National  Telephone  Company.  Sir 
Alexander  Binnie,  Chief  Engineer  to  the  London 
County  Council,  had  not  had  any  experience  in  building 
or  operating  telephone  exchanges.  On  the  strength  of 
those  engineering  estimates,  the  London  County  Coun- 
cil argued  that  $50  a  year  for  unlimited  service  was  a 
reasonable  tariff  for  Metropolitan  London.^ 

Mr.  Newland  estimated  at  $200  per  subscriber  the 
capital  cost  of  a  metallic  circuit  telephone  system  which 
would  serve  10,000  subscribers,  and  would  consist 
mainly  of  wires  run  in  overhead  cables  attached  to 
houses.     He  said  that  the  capital  expenditure  required 

"^Report  from  the  Select  Committee  on  the  Telephone  Sennce. 
189s  ;  q.  1613  to  1620,  Mr.  W.  H.  Dickinson,  Deputy  Chairman 
London  City  Council. 


106        THE   TELEPHONE   IN    GREAT   BRITAIN 

for  an  underground  system  could  "not  be  lightly  enter- 
tained." He  counted  upon  the  London  County  Coun- 
cil obtaining  statutory  power  to  attach  wires  to  private 
property,  and  estimated  the  annual  cost  of  that  privi- 
lege at  $2.40  per  subscriber.  At  that  time  the  Na- 
tional Company  was  paying  $8  per  subscriber  for  way- 
leaves  from  house-top  to  house-top.  Mr.  Newland 
also  estimated  at  400  yards  to  500  yards,  the  average 
distance  between  the  exchanges  and  the  subscribers' 
premises ;  but  in  order  to  be  "on  the  safe  side,"  he 
assumed  an  average  distance  of  one-half  a  mile.  In 
1904,  the  average  distance  between  the  Post  Office's 
Metropolitan  London  exchanges  and  the  Post  Office's 
subscribers  was  1.5  miles;  and  in  1898  the  correspond- 
ing distance  for  the  National  Telephone  Company's 
Metropolitan  London  system  was  about  2  miles. ^ 

Sir  Alexander  Binnie's  estimate  of  the  cost  of  a 
telephone  system  for  10,000  subscribers,  the  wires  to 
be  largely  over  head,  was  $180  per  subscriber,  or  $200 
at  the  outside.  Sir  Alexander  Binnie's  estimates  of 
the  annual  cost  of  way-leaves,  and  the  average  length 
of  the  subscribers'  wires  agreed  with  Mr.  Newland's 
estimates.  Sir  Alexander  Binnie  also  agreed  with  Mr. 
Newland  that  a  $50  tariff  for  unlimited  service  should 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  p.  305,  and  q.  4457  to  4459  and  4464,  Mr.  J.  S.  Forbes,  Chair- 
man National  Telephone  Company ;  Report  from  the  Select  Com- 
mittee on  Telephones,  1898,  q.  7378  and  7379,  Mr.  W.  E.  L.  Gaine, 
General  Manager  National  Telephone  Company :  and  q.  8368  and 
8371,  Mr.  D.  Sinclair,  Engineer-in-Chief  to  National  Telephone 
Company ;  and  Report  of  the  Postmaster  General  on  the  Post  Office, 
1904.  p.  25. 


PROMISE  AND  RETRACTION  107 

be  quite  sufficient;  adding  that  there  v/as  practically 
no  doubt  that  a  $40  rate  would  be  practicable.* 

Mr.  W.  H.  Preece,  Engineer-in-Chie£  to  Post  Office, 
in  1895,  estimated  at  $225  per  subscriber  the  cost  of 
an  overhead  telephone  system  in  Metropolitan  Lon- 
don; and  at  $275  per  subscriber,  the  cost  of  an  under- 
ground system." 

Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office, 
commented  as  follows  upon  the  engineering  estimates 
submitted  by  the  London  County  Council.  "The  evi- 
dence which  has  been  given  with  regard  to  [the  possi- 
bility of]  low  rates  in  this  country  is  the  evidence  of 
persons  who  have  merely  made  estimates  and  have  had 
no  practical  experience  of  the  administration  of  the 
telephone.  Not  one  of  the  gentlemen  who  has  given 
an  estimate  has  had  six  months'  experience  of  practical 
administration ;  that  is,  administration  taking  into  view 
every  possible  item  of  expense,  not  merely  engineering 
expense,  but  the  whole  expense  of  management.  In 
that  view,  and  also  seeing  that  we  cannot  entirely  shut 
out  the  question  that  the  State  may  have  to  take  over 
the  telephones  in  this  country  some  day,  I  should  say 
that  prudence  would  point  to  a  considerable  caution  in 
regard  to  any  general  reduction  of  rates  [tariffs],  or 
any  policy  which  would  bring  about  a  reduction  of 
rates I  say  that  prudence  would  point  to  the  rates 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  p.  303. 

-  Report  from  the  Select  Committee  on  the  Teleptone  Service, 
1895;  q-  2715,   3173  to  3176,  and  2877  and  following. 


108         I'HE    TELEPHONE    IN    GREAT    BRITAIN 

being  maintained  at  a  fair  point,  which  would  afford  a 
certainty  of  profit,  and  while  I  should  hope  that  some 
ilay,  if  the  telephones  did  come  into  the  hands  of  the 
State,  it  would  be  possible  to  reduce  the  rates,  I  should, 
as  an  administrator,  like  to  proceed  upon  the  ground 
of  actual  experience,  and  not  on  the  ground  of  mere 
estimates."^ 

In  1898,  on  behalf  of  the  London  County  Council, 
Sir  Alexander  Binnie,  resubmitted  to  a  Select  Com- 
mittee his  estimate  that  a  telephone  system  could  be  in- 
stalled in  Metropolitan  London  at  a  cost  of  $190  per 
subscriber.  At  the  same  time  Mr.  A.  R.  Bennett,  who 
had  at  one  time  been  in  the  service  of  the  National 
Telephone  Company,  submitted  an  estimate  of  $180 
per  subscriber.^ 

The  Post  Office  opened  its  Metropolitan  London  tele- 
phone system  in  the  spring  of  1902.  In  March,  1906, 
it  had  in  use  32.879  telephones.  At  that  date  the  Post 
The  Cost  of  Office's  capital  expenditure  had  been 
"Spare"  Plant  $270  per  telephone  in  use,  about  $90  of 
that  sum  representing  expenditure  upon  "spare"  plant. 
In  1903-04,  the  capital  investment  had  been  $365  per 
telephone  in  use;  about  $167.50  of  that  sum  represent- 
ing investment  in  spare  plant.  Upon  the  aforesaid 
dates,  the  Post  Office's  spare  underground  wire  had 

^Report  from  the  Select  Committee  on  the  Telephone  Service 
189s  ;  q.  5225. 

^Report  from  the  Select  Committee  on  Telephones,  1898; 
q-  2733,  Sir  Alexander  Binnie;  and  q.  1877,  Mr.  A.  R.  Bennett. 


PROMISE  AND  RETRACTION  109 

been  respectively  43.8  per  cent,  and  53.6  per  cent,  of 
the  total  underground  wire.^ 

One  reason  for  the  wide  divergence  between  the 
estimates  submitted  by  the  London  County  Council  in 
1895  and  1898,  and  the  actual  cost  to  the  Post  Office, 
was  that  the  County  Council  had  proposed  an  over- 
head telephone  system,  whereas  the  Post  Office  had 
constructed  an  underground  system.  Another  reason 
for  the  divergence  between  estimate  and  outcome  was 
that  the  London  County  Council  had  misjudged  the 
effect  of  the  fact  that  a  growing  telephone  business  re- 
quires the  investment  of  a  large  amount  of  capital  in 
spare  plant  which  is  held  in  readiness  for  new  subscrib- 
ers. The  amount  of  spare  plant  required  will  depend 
largely  upon  the  rate  at  which  the  subscribers  are  in- 
creasing. The  success  or  failure  of  persons  who  esti- 
mate the  cost  of  a  proposed  telephone  system,  therefore, 
will  be  determined  largely  by  the  success  with  w'hich 
such  persons  forecast  the  growth  of  their  system. 
In  1898,  Mr.  J.  W.  Benn,  the  representative  of  the 
London  County  Council,  submitted  to  a  Parliamentary 
Select  Committee  the  estimate  accepted  by  the  London 
County  Council.  That  estimate  assumed  that  the  sub- 
scribers would  grow  at  the  rate  of  2,500  a  year,  under 


^Report  of  the  Postmaster  General  on  the  Post  Office,  1904  and 
1906.  In  1904  the  spare  capacity  of  the  National  Telephone 
Company's  exchanges  was  41.2  per  cent.;  the  spare  capacity  of  the 
underground  ducts  and  conduits  was  35.4  per  cent. :  and  the  spare 
capacity  in  the  underground  cables  was  41.6  per  cent.  Report  of 
the  Committee  on  Post  Office  (Telephone  Agreement).  1905;  q.  639, 
Mr.  W.  E.  L.  Gaine,  General  Manager  National  Telephone  Company. 


110        THE    TELEPHONE    IN    GREAT    BRITAIN 

a  flat  rate  of  $50  a  year  for  business  premises,  and  $35 
a  year  for  dwelling  houses.^  In  the  four  years  end- 
ing with  March,  1906,  the  MetropoHtan  London  Post 
Office  Telephone  Exchange  acquired  33,000  subscribers 
and  the  National  Telephone  Company,  in  the  three  years 
and  six  months  ending  with  July,  1905,  increased  the 
number  of  its  London  subscribers  by  about  30,000.^  In 
this  connection  it  should  be  added  that  in  London  the 
Post  Office  and  the  National  Telephone  Company  had 
divided  the  field  and  were  not  competitors. 

When  the  Post  Ofifice  opened  its  London  Telephone 
Exchange  it  rejected  the  demand  for  an  unlimited 
service  at  $50  or  $60  a  year.  It  was  only  in  deference 
The  Post  Office  ^°  ^  public  opinion  created  by  the  large 
opposed  to  "Un-  users  of  the  telephone  that  the  Post 
limited  Service"  Qffice  retained  the  unlimited  service 
rate  at  all.  It  established  an  unlimited  service  rate 
which  was  practically  that  of  the  National  Telephone 
Company,  namely,  $85  for  the  first  instrument,  and  $70 
for  each  additional  instrument.  In  addition,  the  Post 
Ofifice  established  a  measured  service  rate  which  made 
a  distinction  between  subscribers  located  within  the 
County  of  London,"^  and  subscribers  located  outside 
the  County  of  London,  but  within  the  Metropolitan 
London    telephone    area    (630    square    miles).     The 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  2498 
to  2503. 

^Report  from   the  Select   Committee   on   Post   OMce   (Telephone 
Agreement),  1905;  q.   13   and  687. 
'Area   121   square  miles. 


PROMISE  AND  RETRACTION  HI 

former  pay  $25  down,  and  2  cents  per  call  to  a  sub- 
scriber within  the  County  of  London,  and  4  cents  per 
call  to  a  subscriber  outside  the  County  of  London,  but 
within  the  Metropolitan  area.  The  latter  pay  $20 
down,  and  2  cents  per  call  to  a  subscriber  on  the  same 
exchange,  and  4  cents  per  call  to  a  subscriber  on  any 
exchange  other  than  their  own,  Imt  within  the  London 
area.  Both  classes  of  subscribers  must  guarantee  to 
make  calls  aggregating  at  least  $7.50  a  year.  Under 
that  scheme  of  charges,  90  per  cent,  of  the  London 
Post  Office  Telephone  Exchange  subscribers,  in  1905, 
were  measured  service  subscribers;  and  the  average 
receipts  per  subscriber,  unlimited  service  and  measured 
service,  were  $42.50.^ 

At  first  blush  it  might  seem  that  the  fact  that  the 
London  Post  Office  Telephone  System  almost  paid  its 
way  in  1904-05,  with  average  receipts  of  $42.50  per 
subscriber,  supported  the  contention  that  a  rate  of  $50 
per  subscriber  for  unlimited  service  would  be  profitable. 
But  it  must  be  borne  in  mind  that  the  operating  ex- 
penses of  a  telephone  system  of  whose  subscribers  90 
per  cent,  are  on  measured  service  are  radically  lower 
than  the  operating  expenses  of  a  system  whose  sub- 
scribers are  mainly  on  unlimited  service.  Before  a 
Select  Committee  of  1905,  Mr.  John  Gavey,  Engineer- 
in-Chief  to  Post  Office,  stated  that  with  an  extensive 
telephone  system,  based  mainly  on  the  unlimited  serv- 

^  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement).  1905  ;  q.  2109,  Mr.  H.  B.  Smith,  Permanent  Secretary 
to  Post  Office. 


112         THE    TELEPHONE   IN   GREAT    BRITAIN 

ice  rate,  it  was  nothing  unusual  for  subscribers  to  ini- 
tiate 30  or  40  calls  a  day  on  a  single  line.  He  added 
that  the  operating  expenses  increased  nearly  in  the 
same  proportion  as  the  increase  in  the  number  of  calls. 
He  stated  that  in  London  80  per  cent,  of  the  calls 
originating  at  any  exchange  had  to  be  completed 
through  a  second  change ;  and  then  gave  the  following 
data  as  to  the  operating  expenses  occasioned  by  various 
classes  of  subscribers,  assuming  that  80  per  cent,  of 
the  calls  originated  by  each  class  would  have  to  be 
completed  through  a  second  exchange.  Subscribers 
originating  on  an  average  four  calls  a  day  occasioned 
an  annual  expense  of  $6.26;  those  originating  eight 
calls  a  day  occasioned  an  expense  of  $11.36;  and  those 
originating  12  calls  a  day  occasioned  an  expense  of 
$15.84.^  When  one  considers  these  facts  in  connec- 
tion with  the  further  fact  that  an  unlimited  service  rate 
of  $50  would  have  increased  the  proportion  of  unlim- 
ited service  subscribers  from  10  per  cent,  of  the  total 
subscribers  to  at  least  50  per  cent,  and  very  possibly 
even  to  75  per  cent.,  or  more,  one  is  compelled  to  con- 
clude that  the  adoption  of  an  unlimited  service  rate  of 
$50  a  year  w^ould  have  resulted  in  heavy  annual  losses 
to  the  London  Post  Office  Telephone  System.^ 

To  summarize :  the  experience  of  the  Post  Office  as 

^Report  of  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  1804  and  p.  283. 

^Report  of  the  Postmaster  General  on  the  Post  Office,  1904, 
1905  and  1906.  (Continued  on  page  113.) 


PROMISE  AND  RETRACTION  113 

the  builder  and  operator  of  a  telephone  system  in 
Metropolitan  Lxjndon,  contradicts  the 
statements  made  originally  by  the  New 
Telephone  Company,  and  repeated  subsequently  by  the 
London  County  Council  and  the  Corporation  of  the 
City  of  London,  that  it  was  possible  to  install  telephone 
systems  in  Metropolitan  London  at  an  average  cost  of 
about  $200  per  subscriber ;  and  that  it  was  possible  to 
operate  such  systems  on  the  basis  of  a  tariff  of  $50  to 
$60  a  year  for  unlimited  service.  It  has  been  neces- 
sary to  discuss  this  subject  at  some  length,  for  the 
reason  that  a  large  part  of  the  public  dislike  and  dis- 
trust of  the  National  Telephone  Company  has  been  due 
to  the  persistent  assertion  of  the  London  County  Coun- 
cil, the  Corporation  of  the  City  of  London,  numerous 
Members  of  Parliament  and  many  Members  of  City 
Councils,  that  the  refusal  of  the  National  Telephone 
Company  to  adopt  the  tariff  promised  in  1891-92  by 
the  Duke  of  Marlborough,  was  prompted  by  the  Na- 
tional Telephone  Company's  desire  to  pay  dividends 
and  interest  upon  a  largely  inflated  capitalization. 

Balance  Estimated 

available  amount  re- 

toward  quired     for 
Gross                     Working             meeting  de-  deprecia. 

Receipts  Expenses  preciation  ''°"        °' 

$  $  interest.  '  .plant  and 

gjj,  interest   on 

I  '  capital  at  3 
per  cent. 

190S-06 1,318,225  572,985  745.240  694,990 

1904-05 935,305  468,815  466,490  572,135 

1903-04 454,110  286,535  167,575  426,750 

*  The    Post    Office's    allowance    for    depreciation    appears    to    be 
about  three   per    cent,   on   the    capital   invested. 

8 


114         THE   TELEPHONE    IN    GREAT   BRITAIN 

In  closing-,  it  may  be  stated  that  a  subsequent  chapter 
will  show  that  the  experience  of  the  Glasgow  municipal 
telephone  exchange,  by  far  the  largest  municipal  ex- 
change in  the  United  Kingdom,  also  has  proved  that 
the  estimates  of  the  New  Telephone  Company  were 
entirely  erroneous,  both  as  to  the  cost  of  installing  tele- 
phone exchanges,  and  as  to  the  net  revenue  to  be  ob- 
tained under  a  low  unlimited  service  tariff. 


CHAPTER  VIII 

THE    SELECT    COMMITTEE    OF    1895 

A  Select  Committee  of  the  House  of  Commons  is  appointed 
to  inquire  and  report  "whether  the  provision  now  made  for  the 
telephone  service  in  local  areas  is  adequate,  and  whether  it  is 
expedient  to  supplement  or  improve  the  provision  by  the  grant- 
ing of  licenses  to  local  authorities  or  otherwise."  Mr.  W.  H. 
Preece,  Engineer-in-Chief  to  Post  Office,  and  Mr.  J.  C.  Lamb, 
Assistant  Secretary  to  Post  Office,  reject  the  engineering  esti- 
mates submitted  by  the  advocates  of  municipal  telephone  ex- 
changes. Mr.  Lamb  argues  that  under  the  existing  arrangements 
the  Government  is  able  to  protect  the  rights  of  the  public  as  users 
of  the  telephone ;  that  the  establishment  of  competing  municipal 
telephone  exchanges  would  be  liable  to  result  in  the  telephone 
tariffs  becoming  unremunerative,  a  state  of  things  to  be  avoided, 
seeing  that  the  Post  Office  in  all  probability  would  take  over 
the  entire  telephone  business  on  December  31,  191 1.  The  testi- 
mony of  Mr.  H.  E.  Clare,  Deputy  Town  Clerk  of  Liverpool, 
and  official  representative  of  the  Association  of  Municipal  Cor- 
porations, shows  that  the  members  of  that  Association  at  heart 
are  aware  that  the  policy  of  limiting  the  life  of  franchises  and 
providing  for  compulsory  sale  at  structural  value,  checks  the 
investment  of  capital  and  raises  the  cost  of  the  service  to  the 
public.  The  Committee  makes  no  Report;  but  its  Chairman,  the 
Postmaster  General,  is  said  to  have  submitted  a  draft  report 
disapproving  the  policy  of  granting  telephone  licenses  to  the 
municipalities. 

The  heads  of  the  Agreement  of  1892  between  the 
Post  Office  and  the  National  Telephone  Company,  for 
the  transfer  of  the  Compan3''s  trunk  lines  and  the  de- 
marcation of  the  local  telephone  areas,  were  initialled 

115 


IIG        THE    TELEPHONE   IN    GREAT    BRITAIN 

in  August,  1892.  The  Agreement  was  completed  and 
laid  before  the  House  of  Commons  in  1894,  but  it  was 
not  signed  until  March,  1896. 

In  March,  1895,  Mr.  J.  W.  Benn,  a  Member  of  Par- 
liament from  Metropolitan  London  as  well  as  a  Mem- 
ber of  the  London  County  Council,  moved  in  the  House 
of  Commons  "that  a  Select  Committee  be  appointed  to 
consider  the  proposed  draft  agreement  between  the 
Postmaster  General  and  the  National  Telephone  Com- 
pany, and  report  with  reference  to  the  monopoly  which 
may  thereby  be  created ;  the  granting  of  telephone  licen- 
ses to  municipalities ;  and  generally  on  the  future  policy 
of  the  Post  Office  with  reference  to  the  extension  of 
the  telephone  service."  Mr.  Benn  said  that  the  Agree- 
ment "was  a  very  serious  document,  because  it  brought 
them  face  to  face  with  a  new  and  unrestricted  monop- 
oly, which,  in  regard  to  the  telephone  service,  meant 
increased  charges,  the  killing  of  competition,  the  death 
of  municipalized  telephony,  a  vexatious  interference 
with  public  rights,  and,  what  was  more  important  than 
all,  the  prospect  of  paying  'through  the  nose'  in  17 
years'  time  [191 1]  for  a  gigantic  property."  He  asked 
that  there  be  inserted  in  the  Agreement,  clauses  fixing 
maximum  charges  for  the  use  of  the  telephone,  limiting 
the  dividends  of  the  National  Telephone  Company,  and 
providing  for  compulsory  supply.^ 

The  Postmaster  General,  Mr.  Arnold  Morley,  re- 
plied that  "he  strongly  held  that  in  all  matters  proper 

^Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  207. 


THE  SELECT  COMMITTEE  OF  1895  117 

to  them,  municipalities  did  their  work  much  more  ef- 
fectively than  the  central  government  could,  but  there 

was   a   great   distinction  between   tele- 
Postmaster 
General  opposed    phones  and  sucli   subjects  as  gas  and 

to  Municipal  water.     Gas  and  water  were  necessaries 

Telephone  Plants    ,  .,,.,., 

for   every    mhabitant   of   the   country; 

telephones  were  not  and  never  would  be.  It  was  no  use 
trying  to  persuade  themselves  that  the  use  of  telephones 
could  be  enjoyed  by  the  large  masses  of  the  people 

in  their  daily  life He  went  further  and  said 

that  in  a  town  like  London,  or  Glasgow,  or  Belfast,  an 
effective  telephone  service  would  be  practically  im- 
possible if  the  large  majority  of  the  houses  were  fur- 
nished with  telephones,  so  great  would  be  the  confusion 
caused  by  the  increased  number  of  exchanges.  He  was 
not  stating  his  own  opinion,  but  that  of  experts.  What 
was  wanted  was  prompt  communication,  and  if  there 
were  a  large  number  of  people  connected  with  the 
various  exchanges,  and  a  greatly  increased  number  of 
exchanges,  you  could  not  get  that  prompt  communica- 
tion on  which  alone  the  value  of  the  telephone  system 
depended.  Another  argument  against  a  municipal  tele- 
phone system  was  that  it  was  in  no  sense  a  local  re- 
quirement. Year  by  year  the  telephone  system  was 
becoming  more  and  more  a  national  means  of  com- 
munication from  town  to  town,  and  it  was  no  more 
local  in  its  attributes  at  the  present  time  than  either  the 
post  or  the  telegraph.  He  did  not  think  that  any  one 
would  say  that  the  municipalities  should  have  local  con- 


118         THE    TELEPHONE   IN    GREAT    BRITAIN 

trol  of  the  telegraph  and  postal  services."  The  Post- 
master General  concluded  with  the  statement  that  the 
Government  was  willing  that  the  question  should  be 
considered  on  the  basis:  "That  a  Committee  shall  be 
appointed  to  consider  and  report  whether  the  provision 
now  made  for  the  telephone  service  in  local  areas  is 
adequate,  and  whether  it  is  expedient  to  supplement  or 
improve  the  provision  either  by  the  granting  of  licenses 
to  local  authorities  or  otherwise."^ 

The  Chancellor  of  the  Exchequer,  Sir  William  Ver- 

non-Harcourt,  in  the  course  of  his  reply  said  that  "the 

National  Telephone  Company  was,  in 

National  ^  f      j  y 

Telephone  Com-  ^^ct,  only  actmg  as  temporary  agent 
pany  the  Govern-  for  the  Government,  and  if  the  Govern- 

lueut's  "Agent"  ,  ^       ^-  £     i    r     -^u  i.i- 

ment  were  not  satisfied  [with  the  serv- 
ice which  the  Company  gave  the  public]  they  could  give 
it  in  favor  of  some  other  persons. "^ 

Before  the  Select  Committee  of  1895,  Mr.  J.  C. 
Lamb,  Assistant  Secretary  to  Post  Office,  argued  as 
follows :  "Of  course,  I  do  not  know  what  may  happen 
[upon  the  expiry  of  the  National  Telephone  Company's 
license  in  191 1],  but  I  should  say  the  reasonable  thing 
to  happen  would  be  this:  that  at  a  given  date,  which 
would  give  the  Post  Office  sufficient  time  to  supply  a 
system  of  its  own  in  the  event  of  negotiations  [with 
the  Company]  falling  through,  the  Post  Office  would 
approach  the  National  Telephone  Company  and  say: 

^Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  214. 
*  Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  235. 


THE  SELECT  COMMITTEE  OF  1895  119 

'What  is  your  price  for  your  plant?'  It  would  ascer- 
tain by  examination  whether  it  was  in  a  fair  condition ; 
and  if  the  National  Telephone  Company  were  reason- 
able, the  Post  Office  would  pay  a  reasonable  price,  and 
in  my  opinion  would  be  supported  by  public  opinion 
in  doing-  it.  If,  on  the  other  hand,  the  National  Tele- 
phone Company,  feeling  secure,  and  thinking  the  Post 
Office  could  not  supply  itself  in  any  other  way,  held  out 
for  unreasonable  terms,  the  Post  Office  would  immedi- 
ately proceed  to  supply  itself  with  another  system,  and 
as  soon  as  the  license  expired  would  be  able  to  bring 
its  system  into  operation,  or  before,  if  necessary.".  .  .  . 
Mr.  Lamb  as  w-ell  as  Mr.  W.  H.  Preece,  Engineer- 
in-Chief  to  Post  Office,  rejected  the  arguments  in  sup- 
port of  municipal  licenses  advanced  by 
Post  OMce's  ^  X  ^  -1, 

Experts  opposed    the    London    County    Council  s    repre- 

to  Municipal  sentatives  and  others,  and  based  on  the 
estimates  submitted  by  Mr.  Newland 
and  Sir  Alexander  Binnie,  as  well  as  on  the  alleged  ex- 
perience of  Norway  and  Sweden  and  other  foreign 
countries.  Those  arguments  alleged  that  the  National 
Telephone  Company's  charges  were  excessive,  and  that 
the  municipalities  would  be  able  to  give  much  lower 
tariffs.  Upon  the  question  of  policy  involved  in  the 
proposal  of  municipal  competition,  Mr  Lamb  expressed 
himself  as  follows:  "Seeing  that  we  cannot  entirely 
shut  out  the  question  that  the  State  may  have  to  take 
over  the  telephones  some  day,  I  should  say  that  pru- 
dence would  point  to  a  considerable  caution  in  regard 


120        THE    TELEPHONE   IN    GREAT   BRITAIN 

to  any  general  reduction  of  rates,  or  any  policy  which 
would  bring  about  a  reduction  of  rates.  As  a  servant 
of  the  public,  I  certainly  should  not  like  to  have  a  part 
in  the  taking  over  [in  191 1]  of  a  depreciated  business, 
on  which  there  might  be  a  risk  of  loss  to  the  general 
taxpayer.  I  say  that  prudence  would  point  to  the  rates 
being  maintained  at  a  fair  point,  which  would  afford  a 
certainty  of  profit,  and  while  I  should  hope  that  some 
day,  if  the  telephone  did  come  into  the  hands  of  the 
State,  it  would  be  possible  to  reduce  rates,  I  should,  as 
an  administrator,  like  to  proceed  upon  the  ground  of 
actual  experience,  and  not  on  the  ground  of  mere  esti- 
mate  If    the    Postmaster    General    encourages    a 

policy  under  which  the  thing  [telephone  business] 
could  not  possibly  pay,  and  there  must  be  a  great  loss, 
that  whole  thing  has  to  come  back  on  his  hands  some 
day  as  a  bad  bargain.".  Mr.  Lamb  added :  "I  think 
we  have  proved  by  actual  experience  that  the  possi- 
bility of  competition  [by  the  Post  Office  itself]  has 
produced  certain  good  results,  and,  if  it  were  necessary, 
that  possibility,  I  think,  would  produce  good  results 
again,"  that  is,  give  the  public  an  adequate  service  at 
reasonable  charges.  In  conclusion  Mr.  Lamb  stated 
that  a  notice  appeared  every  quarter  in  the  Post  Office 
Guide  that  the  Department  was  prepared  to  supply  tele- 
phone service  if  a  clear  and  definite  request  was  made, 
that  request  was  reasonable,  and  the  National  Tele- 
phone Company  could  not  or  would  not  supply  a  satis- 
factory service.     The  Postmaster  General  would  con- 


THE  SELECT  COMMITTEE  OF  1895  121 

sicler  every  such  request  on  its  merits ;  he  had  no  fixed 
rule  as  to  the  minimum  number  of  persons  who  must 
offer  themselves  as  subscribers.^ 

Interesting  and  exceedingly  instructive  was  the  testi- 
mony of  Mr.   H.   E.   Clare,   Deputy  Town   Clerk  of 

Liverpool,  who  appeared  as  one  of  the 
Mr.  Clare  on  .... 

Compulsory  Sale    ^^^'o  delegates  from  the  Association  of 

at  Structural  Municipal  Corporations.  The  witness 
said  the  National  Telephone  Company 
could  not  be  expected  to  give  a  service  satisfactory  in 
quality  or  in  extent  unless  it  were  given  way-leaves 
and  were  relieved  of  the  uncertainty  as  to  what  would 
become  of  it  in  191 1.  In  fact,  the  Government  ought 
to  give  the  Company  a  charter  during  good  behavior, 
subject  to  the  right  of  the  Government  to  purchase  at 
12  months'  notice  upon  specified  terms.  Those  terms, 
however,  must  not  be  cost  of  replacement  value.  He 
said :  "I  do  not  think,  myself,  that  cost  price  really  is 
the  proper  basis  to  go  upon  in  buying  up  any  under- 
taking. The  value  of  an  undertaking  is  what  it  is 
really  worth  for  the  use  to  which  it  can  be  put."  He 
added  that  a  company  subject  to  compulsory  sale  at 
structural  value  had  to  make  each  year  a  large  sinking 
fund  payment,  and  that  prevented  the  company  to  that 
extent  from  reducing  its  charges  to  the  public.  On 
the  other  hand,  the  public  wanted  its  service  as  cheaply 
as  it  could  be  had,  it  did  not  want  to  pay  extra  for  the 

^Report   from   the  Select   Committee   on    the   Telephone   Service, 
1895;  q.  5261,  5225,  5258,  5272,  5279,  5209,  5237  to  5241   and  5252. 


122       THE   TELEPHONE   IN   GREAT   BRITAIN 

sake  of  benefiting  the  National  Exchequer  in  191 1. 
Mr.  Clare  said  that  he  had  time  and  again  expressed 
those  views  in  the  meetings  of  the  Association  of  Mu- 
nicipal Corporations,  and  no  one  ever  had  dissented 
from  them.  He  added  that  he  had  never  heard  it  sug- 
gested that  any  English  City  should  have  a  license  to 
engage  in  the  telephone  business.  The  demand  for 
municipal  telephones  was  limited  to  Scotland;  and  the 
Scotch  cities  were  not  represented  in  the  Association 
of  Municipal  Corporations.^ 

Mr.  John  Harrison,  Town  Clerk  of  Leeds,  who  was 
the  other  delegate  of  the  Association  of  Municipal  Cor- 
porations, said  :  "Speaking  generally,  I  agree  with  what 
Mr.  Clare  has  said ;  but  there  are  some  points,  possibly 
not  of  great  importance,  upon  which  I  entertain  a  differ- 
ent view;  but  I  feel  that  Mr.  Clare  has  given  much 
greater  attention  to  this  subject  than  I  have,  and  has 
been  much  longer  associated  with  the  association,  so 
that  possibly  he  is  better  able  to  speak  upon  that  sub- 
ject than  I  am. "2 

This  testimony  of  Mr.  Clare,  the  representative  of 
the  Association  of  Municipal  Corporations,  is  of  the 
utmost  significance.  It  shows  that  the  members  of  the 
Association  at  heart  are  aware  that  short  lived  fran- 
chises coupled  with  the  provision  for  compulsory  sale 
at  structural  value  check  the  investment  of  capital  and 

'  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895;  q.  1194.  1195.  1344,  1236,  1219,  1264,  1238,  1239,  1204,  1474, 
1487  et  passim. 

^  Report  from  the  Select  Committee  on  Telephone  Service, 
1895;  q.  1482  to  1491,  1538  and  1548. 


THE  SELECT  COMMITTEE  OF  1895  123 

tend  to  raise  the  cost  of  the  service  to  the  pubhc.  That 
effect  the  representative  of  the  Association  admitted — 
nay,  urged  as  an  insuperable  objection  to  the  policy  in 
question — in  the  ca?e  of  the  telephone  industry,  at  the 
time  when  there  was  no  prospect  that  the  British  Gov- 
ernment would  turn  over  the  telephone  business  to  the 
municipalities.  But  in  the  case  of  the  street  railway 
industry,  the  electric  lighting-  industry,  and  the  electric 
power  supply  industry — all  of  which  industries  the 
municipalities  all  along  have  sought  to  acquire  by 
means  of  the  policy  of  short  lived  franchises  coupled 
with  compulsory  sale  at  structural  value — the  Associa- 
tion of  Municipal  Corporations  has  forced  the  succes- 
sive Governments  of  the  day  to  retain  that  policy, 
though  several  Governments  of  the  day  have  been 
ready  to  abandon  it,  in  the  interest  of  the  people  as 
consumers  as  well  as  in  the  interest  of  Great  Britain's 
commercial  and  industrial  development.^  To  the  stu- 
dent of  the  politics  of  public  ownership,  few  things 
could  be  more  illuminating  than  to  find  the  British 
Government  and  the  English  cities  alternately  insist- 
ing upon  and  rejecting  the  policy  of  short  lived  fran- 
chises coupled  with  compulsory  sale  at  structural  value, 
accordingly  as  the  policy  happened  to  promote  or  not 
to  promote  their  immediate  pecuniary  interests. 

The  Committee  of  1895  had  no  opportunity  to  make 
a  Report ;  when  it  assembled  to  agree  upon  its  Report, 

^  H.  R.   Meyer :     Municipal  Ozvnership  in   Great  Britain. 


124        THE    TELEPHONE   IN    GREAT    BRITAIN 

dissolution  of  Parliament  was  announced.^  It  is  said 
to  be  a  matter  of  common  knowledge,  however,  that 
the  Chairman,  Mr.  Arnold  Morley,  who  was  also  the 
Postmaster  General,  submitted  to  the  Committee  a  draft 
report  disapproving  the  granting  of  telephone  licenses 
to  municipalities.  But  since  Parliament  was  on  the 
eve  of  a  dissolution,  and  the  Committee  was  not  unani- 
mous, the  draft  report  was  withdrawn.^ 

In  passing,  it  may  be  added  that  in  1898  Mr.  Arnold 
Morley  testified  that  when  he  had  been  Postmaster 
General,  in  1892  to  1895,  he  had  been  so  strongly  op- 
posed to  competition  in  the  telephone  business  that  he 
had  been  unable  to  recommend  that  tlie  Government 
permit  the  Post  Office  to  compete  with  the  National 
Telephone  Company  in  those  places  in  which  the  Post 
Office  had  established  telephone  exchanges.^ 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  482. 
^  The  Times,  January  23,   1899  :      The  Case  of  the  National  Tele- 
phone Company,  by  a  Correspondent. 

*  Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6716. 


CHAPTER  IX 

THE  LONDON  COUNTY  COUNCIL  EPISODE 

From  1890  to  1899,  the  National  Telephone  Company  in  vain 
applied  to  the  London  County  Council  for  permission  to  put  its 
wires  under  the  streets.  In  1899  negotiations  were  broken  off, 
and  the  deadlock  thus  established  was  finally  broken  by  the  Post 
Office  in  November,  1901.  The  London  County  Council  tried  to 
use  the  power  of  veto  given  it  by  the  Act  of  1892,  first,  for  the 
purpose  of  prescribing  the  National  Telephone  Company's  tariff ; 
second,  for  the  purpose  of  compelling  the  Company  to  agree  to 
grant  free  intercommunication  between  its  subscribers  and  the 
subscribers  to  the  proposed  Post  Office  Metropolitan  London 
Telephone  Exchanges.  From  1899  to  1901,  inclusively,  the  Post 
Office  cooperated  with  the  London  County  Council  in  blocking 
the  efforts  of  the  National  Telephone  Company  to  get  under- 
ground way-leaves  in  the  Administrative  County  of  London,  area 
121  square  miles. 

The   London    County   Council   was   established   in 

1889,  as  the  local  governing  body,  for  many  purposes, 

of  that  part  of  Metropolitan  London  comprised  within 

,r-  1        the  County  of  London  and  embracing 

Nine  years  of  ■'  ° 

Unsuccessful  an  area  of  121  square  miles.  In  1890, 
Negotiation  ^|^g  National  Telephone  Company  made 

the  first  of  a  series  of  unsuccessful  efforts,  extending 
over  a  period  of  nine  years,  to  obtain  permission  from 
the  London  County  Council  to  put  its  wires  under- 
ground within  the  County  of  London.     Passing  over 

the  unsuccessful  attempts  of  the  first  six  years,  the 

12.5 


126        THE   TELEPHONE   IN   GREAT    BRITAIN 

narrative  may  begin  with  the  appHcation  made  by  the 
Company  in  May,  1896.  In  the  preceding  five  or  six 
years  the  Company  had  spent  in  MetropoHtan  London 
some  $1,500,000  in  converting  its  single  overhead 
wires  into  overhead  twin  wires.  But  it  had  found  the 
overhead  twin  wires  extremely  costly,  as  well  as  in- 
efficient, and  it  was  unwilling  to  spend  further  large 
sums  on  an  overhead  system  which  soon  would  have 
to  be  replaced  by  an  underground  system.*  Moreover, 
it  was  becoming  increasingly  difficult  to  reach  intend- 
ing subscribers  by  means  of  wires  strung  from  house- 
top to  house-top.^ 

After  thirteen  months  of  negotiation,  the  London 
County  Council  and  the  National  Telephone  Company 
agreed  upon  terms,  which,  on  June  i,  1897,  were  em- 
bodied by  the  London  County  Council  in  a  series  of 
resolutions.  It  remained  to  embody  those  resolutions 
in  a  formal  document,  to  be  signed  by  the  Council  and 
The  County  ^^^  Company.     But   when   that   docu- 

Cfluncil  Changes  ment  was  submitted  to  the  Company, 
Its  Mmd  Qj^  January  29,   1898,  it  was  found  to 

contain  two  new  conditions,  to-wit,  that  the  Company 
make  an  annual  payment  of  several  thousand  pounds 
for  way-leaves;  and  establish  flat  rates  of  respectively 
$75  a  year  for  business  houses,  and  $50  a  year  for 

^Glasgow  Telephone  Inquiry.  1897;  q.  7430,  7431  and  7601,  Mr. 
W.  E.  L.  Gaine,  General   Manager  National  Telephone   Company. 

'Hansard's  Parliamentary  Debates;  April  2,  1897;  p.  458,  Sir 
James  Fergusson,  a  Director  of  the  National  Telephone  Company. 


LONDON  COUNTY  COUNCIL  EPISODE  127 

private  houses.^  The  latter  demand  would  have  in- 
volved the  Company  in  an  immediate  reduction  of  rev- 
enue of  $200,000  a  year.-  The  Company  replied  that 
it  would  accede  to  the  first  demand,  if  the  London 
County  Council  would  agree  to  indemnify  the  Com- 
pany against  any  claims  for  way-leave  payments  that 
might  be  made  in  the  future  by  any  of  the  fifty  road 
authorities  within  the  County  of  London,  those  author- 
ities alone  having  the  legal  rights  to  demand  way-leave 
payments.  The  County  Council  admitted  that  it  really 
was  not  entitled  to  demand  way-leave  payments;  that 
its  authority  over  the  streets  in  rectitude  was  limited 
to  such  measures  as  were  required  to  secure  and  pro- 
mote the  comfort  and  safety  of  the  traveling  public. 
Nevertheless  it  refused  either  to  withdraw  its  demand 
or  to  give  the  required  bonds  of  indemnification.^  It 
was  able  to  do  that,  for  there  was  no  appeal  from  its 
veto.  It  sought  to  justify  its  course  by  saying  that  the 
fifty  road  authorities  could  not  be  induced  to  cooperate 
to  the  extent  of  agreeing  on  an  uniform  charge  for 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  652  to  656,  Mr.  Benn,  representing  the  London 
County  Council,  and  Mr.  W.  E.  L.  Gaine,  General  Manager  National 
Telephone    Company. 

"The  Company's  scale  of  charges  for  the  London  telephone 
area,  630  square  miles,  was :  Under  a  five  year  agreement,  $8?  a 
year,  to  business  houses  for  the  first  connection,  and  $63.75  for 
each  additional  connection  ;  and  $50  to  dwelling  houses.  Under  an 
annual  agreement  the  charges  were  to  business  houses,  $100  for  the 
first  connection,  and  $75  for  each  additional  one  ;  to  dwelling  houses, 
$60.  Report  from  the  Select  Committee  on  Telephones,  1898; 
q.   2435    and    6507. 

^Report  from  the  Select  Committee  on  Telephones.  1808:  q.  2507 
and  2508,  Mr.  J.  W.  Benn,  representing  the  London  County  Council. 


128        THIi   TELEPHONE   IN  GREAT   BRITAIN 

way-leaves;  and  it  seemed  to  imply  that  it  would  be 
contrary  to  public  policy  to  allow  the  National  Tele- 
phone Company  to  escape  making  way-leave  payments 
within  the  area  of  one  or  more  of  the  local  road  author- 
ities. As  to  the  London  Count  Council's  second  re- 
t]uest,  to-wit,  a  reduction  to  a  specified  figure  of  the 
charges  made  by  the  Company  for  the  use  of  the  tele- 
phone, the  Company  at  firsi  declined  to  consider  the 
request,  on  the  ground  that  it  was  clearly  ultra  vires  of 
the  County  Council.  But  subsequently  the  Company 
offered  to  establish  a  measured  service  for  such  sub- 
scribers as  deemed  the  existing  flat  rates  too  high. 
The  Company  furthermore  offered  to  put  itself  "under 
obligations  to  supply  service  to  all  intending  subscrib- 
ers equally  and  without  prejudice."^  That  obligation 
the  Company  could  not  assume  so  long  as  it  had  no 
public  way-leaves,  and  depended  upon  the  good-will  of 
property  owners.  The  County  Council  rejected  the 
offer  of  a  measured  service,  being  insistent  upon  the 
achievement  of  a  low  flat  rate. 

In  September,  1899,  the  London  County  Council 
abandoned  the  demands  to  which  it  had  adhered  since 
January,  1898.  It  now  demanded  that  the  National 
Telephone  Company  should  agree  to  give  its  subscrib- 
ers the  same  tariff  and  terms  of  subscription  as  should 

^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  6502 
and  following,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone 
Company.  In  1905  Mr.  Forbes'  testimony  was  repeated  by  Mr.  W^. 
E.  L.  Gaine,  General  Manager  National  Telephone  Company.  Report 
from  the  Select  Committee  on  Post  OfHce  (Telephone  Agreement) 
1005:   (\.   645   and    follrAvin.i;. 


LONDON  COUNTY  COUNCIL  EPISODE  129 

eventually  be  established  by  the  proposed  Post  Office 
telephone  system  for  Metropolitan  London/  besides 
giving-  free  intercommunication  with  the  future  sub- 
scribers to  the  aforesaid  Post  Office  system.  Those 
terrhs  the  Company  rejected;  and  negotiations  were 
broken  off.^  At  this  time  there  were  upward  of  i,ioo 
people  who  wished  to  be  joined  to  the  National  Tele- 
phone Company's  London  exchanges,  but  the  Company 
could  not  reach  them  by  way  of  the  house-tops.^ 

On  June  21,  1898,  Mr,  J.  W.  Benn,  the  official  repre- 
sentative of  the  London  County  Council,  appeared  be- 
Thc  Making  of  ^o^"^  the  Select  Committee  on  Tele- 
Public  Opinion  phones,  and,  under  the  skilful  coaching 
of  Mr.  James  Stuart,  a  Member  of  the  Committee,  gave 
testimony  which  implied  that  there  were  numerous 
persons  in  London  to  whom  the  National  Telephone 
Company  declined  to  give  service  on  the  ground  that 
it  would  not  pay  the  Company  to  serve  them.*  The 
incident  is  but  one  of  the  numerous  ones  occurring 
constantly  in  the  House  of  Commons  and  before  Par- 
liamentary Select  Committees,  incidents  based  on  the 
assumption,  that,  so  far  as  the  majority  of  the  Members 
of  the  House  of  Commons,  and  the  great  bulk  of  the 


*  The    Metropolitan    London    Post    Office   Telephone    System   was 
opened    for   business   in    the    spring   of    1902. 

^Hansard's    Parliamentary    Debates;    January    27,    1902,    p.  1002, 
Mr.    Austen    Chamberlain,    Postmaster    General. 
'The  Electrician;  May  12,   1899. 

*  Report  from  the  Select  Committee  on  Telephones.  1898:  q.  2586, 
Mr.  J.  W.  Benn. 


130        THE    TELEPHONE    IN    GREAT    BRITAIN 

outside  public  are  concerned,  one  may  make  without 
fear  of  exposure  statements  and  insinuations  that  would 
not  pass  with  well  informed  persons. 

The  deadlock  established  in  1899  between  the  Lon- 
don County  Council  and  the  National  Telephone  Com- 
pany, lasted  until  November,  1901,  when  it  was  broken 

by  the  intervention  of  the  Post  Office. 
Post  OMce  '     ^  .  ,       >T    •       ,   n-  1 

cooperates  zvith      i"   the  meantime,   the   National    lele- 

London  County  phone  Company,  acting-  with  the  con- 
sent of  the  London  County  Council, 
had  begun  to  lay  its  wires  under  the  ground  shortly 
after  the  understanding  of  June,  1897,  had  been 
reached.  Subsequently,  when  the  London  County 
Council  withdrew  its  consent,  the  Company  continued 
its  underground  work,  with  the  consent  of  the  local 
road  authorities  concerned.  In  February,  1900,  the 
Postmaster  General,  through  the  Attorney  General 
sought  a  perpetual  Injunction  restraining  the  National 
Telephone  Company  from  opening  any  street  or  public 
road  within  the  County  of  London  without  the  consent 
of  the  Postmaster  General  and  the  London  County 
Council.  The  Injunction  was  granted  in  July,  1900.^ 
The  intervention  of  the  Post  Office  came  about  as 
follows:  In  1899,  the  Government  resolved  to  estab- 
lish in  Metropolitan  London  a  Post  Office  Telephone 

^Report  from  the  Select  Commiltee  on  Post  Office  (Telephone 
Agreement).  1905  ;  p.  235,  Sir  Robert  Hunter,  Solicitor  to  Post 
Office;  and  q.  557  and  645  to  647,  Mr.  W.  E.  L.  Gaine,  General 
Manager  National  Telephone  Company. 


LONDON  COUNTY  COUNCIL  EPISODE      .     I'M 

System ;  but  when  it  came  to  canvass  for  subscribers, 
it  experienced  great  difficulty  because  it  could  not 
promise  intercommunication  with  the  subscribers  to 
the  National  Telephone  Company,  who  numbered  be- 
tween 40,000  and  50,000.^  The  Telegraphs  Act,  1899, 
which  had  authorized  not  only  the  Post  Office  but  also 
some  thirteen  hundred  local  authorities  to  establish 
telephone  exchanges,  had  prescribed  the  conditions  un- 
der which  the  local  authorities  might  demand  inter- 
communication with  the  subscribers  of  the  National 
Telephone  Company  exchanges.  But  the  Act  of  1899 
had  not  given  the  Post  Office  the  right  to  demand  inter- 
communication between  the  Post  Office  telephone  ex- 
changes and  the  National  Telephone  Company  ex- 
changes. Perhaps  the  Government,  when  framing 
the  Telegraphs  Bill,  1899,  had  deemed  it  unfair  to  ask 
for  such  power :  perhaps  it  had  deemed  it  unnecessary. 
Be  that  as  it  may,  when  the  Government  subsequently 
found  that  the  Post  Office  could  get  practically  no  sub- 
scribers for  its  contemplated  Metropolitan  London 
telephone  system,  the  Government  used  every  means 
in  its  power  to  prevent  the  National  Telephone  Com- 
pany from  getting  the  way-leaves  required  for  taking 
on  new  subscribers.  One  of  those  means  was  the 
application  for  the  Injunction  granted  in  July,  1900. 
From  July,  1900,  to  November,  1901,  the  Post  Office 
and  the  London  County  Council  cooperated  to  throw 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  13  and  15,  Sir  Robert  Hunter.  Solicitor  to 
Post  Office. 


132        THE    TELEPHONE   IN   GREAT    BRITAIN 

every  possible  difficulty  in  the  way  of  the  National 
Telephone  Company.  On  the  last  mentioned  date,  the 
Company  granted  the  Post  Office's  demand  for  free 
intercommunication ;  and  thereupon  the  Post  Office 
undertook  to  lay  for  the  National  Telephone  Company 
such  underground  wires  as  it  should  see  fit,  at  an  an- 
nual rental  of  $io  per  mile  of  double  wire.  The  Lon- 
don County  Council,  on  the  other  hand,  never  with- 
drew its  veto  upon  the  National  Telephone  Company 
laying  wires  underground.  It  said  that  the  Post  Office 
had  used  the  London  County  Council  until  it  had 
brought  the  National  Telephone  Company  to  terms, 
and  had  then  thrown  over  the  London  County  Council. 


CHAPTER  X 

THE  CITY  OF  LONDON  EPISODE 

The  City  of  London,  desiring  to  compel  the  National  Tele- 
phone Company  to  permit  the  City  authorities  to  fix  the 
Company's  tariff,  never  has  given  its  consent  to  the  National 
Telephone  Company  laying  its  wires  under  the  streets  or  erect- 
ing poles  in  the  streets.  In  November,  1901,  the  Post  Office 
overrode  the  City  of  London,  contracting  to  lay  such  under- 
ground wires  for  the  Company  as  it  should  suit  the  pleasure  of 
the  Post  Office  to  let  the  Company  have. 

In  April,  1896,  the  National  Telephone  Company 
applied  to  the  City  of  London,  area  one  square  mile,  for 
permission  to  lay  pipes  under  ground.  The  Commis- 
sioners of  Sewers,  who  were  the  road  authority,  declined 
to  consider  the  application  unless  the  Company  should 
agree  to  permit  the  City  authorities  to  prescribe  the 
charges  to  be  made  to  the  subscribers  to  the  telephone. 

At  about  this  same  time,  the  Post  Office,  in  the 
interest  of  its  trunk  line  service,  concluded  to  lay  addi- 
tional underground  pipes  from  the  Post  Office  Trunk 
Line  Exchange  to  the  National  Telephone  Company's 
local  exchanges,  in  order  to  increase  the  facilities  for 
long  distance  conversation.  The  Commissioners  of 
Sewers  withheld  their  consent,  saying:  "We  will  give 
the  Postmaster  General  our  consent  to  raise  the  roads, 
if  he  will  undertake  that  these  wires  shall  not  be  used 

133 


134        THE    TELEPHONE    IN   GREAT    BRITAIN 

by  the  National  Telephone  Company."  The  Postmaster 
General,  unlike  the  National  Telephone  Company,  has 
the  power  to  appeal  from  any  local  road  authority,  first 
to  a  stipendiary  magistrate  or  to  a  County  Court  judge, 
and  then  to  the  Railway  and  Canal  Commissioners. 
The  Postmaster  General  made  use  of  his  right  of  appeal, 
and  was  sustained  in  both  courts.  Mr.  Justice  Wright 
gave  the  judgment  of  the  Railway  and  Canal  Com- 
missioners, saying:  ''I  think,  first,  that  the  objection 
which  is  made  is  not  of  a  class  which  it  was  intended 
these  street  authorities  should  be  enabled  to  raise.  I 
lliink  the  objections  which  they  are  entitled  to  raise 
p  , ..    ^  must  be  objections  of  a  kind  which  con- 

venience,  not  cern  them  as  a  road  authority,  and  that 
OMcial  Caprice  j^^j.^  ^|^g  objection  which  is  raised  is  not 
in  their  interest  as  a  road  authority  at  all,  and  does  not 
concern  them  as  such.  But  secondly,  even  if  they  can 
be  heard  to  raise  an  objection  of  that  kind,  it  seems  to 
me  that  this  objection  which  they  have  raised  is  clearly 
an  unreasonable  one.  First  of  all,  I  should  say  it  was 
contrary  to  the  general  principles  of  common  law,  and 
contrary,  therefore,  to  the  probable  intention  of  this 
enactment,'  that  they,  the  mere  street  authority,  should 
have  the  right  to  exclude  any  portion  of  the  public 

^  The  Commissioners  of  Sewers  claimed  to  act  under  Tele- 
graphs Act,  1863,  section  5,  subsection  3  :  "Any  consent  may  be 
given  on  such  pecuniary  or  other  terms  or  conditions  (being  in 
themselves  lawful),  or  subject  to  such  stipulations  as  to  time  or 
mode  of  execution  of  any  work,  or  as  to  the  removal  or  alteration 
in  any  event  of  any  work,  or  as  to  any  other  thing  connected  with 
or  relative  to  any  work,  as  the  person  or  body  giving  consent  thinks 
fit." 


THE  CITY  OF  LONDON  EPISODE  I:i5 

whatever.  Any  objection  which  they  may  raise,  it 
seems  to  me,  must  be  objections  affecting,  prima  facie 
at  any  rate,  the  whole  of  the  pubHc,  the  whole  of  the 
persons  who  may  be  concerned  in  the  matter.  This 
objection  does  not  apply  to  the  whole  of  the  public. 
The  very  essence  of  it  is  that  it  is  an  objection  to  the 
use,  by  a  particular  company,  of  these  junctions  in  order 
that  that  company  may  be  broui^ht  to  terms  as  to  their 
tariff."^ 

Mr.  William  H.  Preece,Engineer-in-Chief  to  the  Post 
Office,  in  testifying  upon  the  foregoing  episode  before 
the  Select  Committee  of  1898,  used  these  words  :  "Look 
at  the  consequence  of  that  refusal.  In  the  case  of  the 
City  this  quarrel  has  been  going  on  for  a  year  and  a  half, 
and  for  more  than  twelve  months  we  have  been  pre- 
vented from  carrying  out  improvements  in  the  working 
of  the  system  in  London,  which  the  public  would  have 
had  the  benefit  of  twelve  months  ago  if  the  City  people 
had  not  been  so  stupidly  obstructive."  In  reply  to  Mr. 
Bartley's  question  :  "Do  you  use  the  word  'stupidly' 
meaningly?  Would  you  not  rather  withdraw  that 
The  Manufacture  word?"  Mr.  Preece  replied:  "I  used  it 
of  Public  Opinion  very  meaningly,  sir."  He  added  :  "The 
City  gentlemen  did  not  stop  there;  they  issued  tlie 
correspondence  over  the  whole  country  and  they 
have  scattered  and  published  an  absolute  fallacy"  over 

"^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  310, 
and  6934,  Sir  Robert  Hunter,   Solicitor  to  Post  Office. 

^  To  wit,  that  the  Post  Office  proposed  to  lay  underground  wires 
between  the  exchanges  of  the  National  Telephone  Company  and  the 
premises  of  the  Company's  subscribers. 


1:^6  THE    TELEPHONE    IN   GREAT    BRITAIN 

the  whole  country,  and  have  led  such  common-sense 
people  as  the  Corporation  of  Glasgow  and  the  Corpora- 
tion of  Edinburgh  to  take  up  the  same  line;  the  result 
is  we  are  now  in  trouble  with  these  gentlemen ;  so  that 
we  have  great  trouble  with  the  big  cities  of  Edinburgh 
and  Glasgow,  and  we  have  had  trouble  in  Brighton."^ 

The  City  of  London,  within  the  area  of  which  is 
transacted  daily  more  business  ^han  is  transacted  within 
any  area  of  similar  size  in  the  world,  sent  to  represent 
it  before  the  Select  Committee  of  1898,  Mr.  Alpheus 
C.  Morton,^  a  Member  of  the  Common  Council,  who 
A  City  of  London  saw  fit  to  use  these  words  in  the  open- 
Statesman  ing  of  his  Statement.    "I  am  sorry  to 

have  noticed,  during  the  last  twenty  or  thirty  years, 
that  London  has  been  more  victimized  by  public  com- 
panies than  any  other  part  of  the  United  Kingdom; 
therefore,  I  suppose  they  think :  We  need  not  take 
much  notice  of  the  London  people ;  we  may  treat  them 
how  we  like"  [in  the  matter  of  the  quality  of  the  serv- 
ice given.  ]-^ 

Mr.  Morton  repeated  before  the  Committee  the 
charge  that  the  Post  Office  had  not  only  claimed  the 
legal  power  to  lay  underground  wires  for  the  National 
Telephone  Company  between  the  Company's  exchanges 
and  the  premises  of  the  Company's  subscribers,  but  had 

^  Report  from  the  Select  Comittee  on  Telephones,  1898;  q.  5331, 
5333  and  4976,  Mr.  W.  H.  Preece,  Engineer-in-Chief  to  Post  Office. 

-Who's  Who.  1907.  Morton,  A.  C,  M.  P.  (L.)  since  1906; 
Architect  and  Surveyor.  Member  of  Common  Council,  City  of 
London,  since  1882;  M.  P.  (L.)  Peterborough,  1889-95.  Club: 
National  Liberal. 

'Report  from  the  Select  Committee  on  Telephones,  1898;  q.  4000. 


THE  CITY  OF  LONDON  EPISODE  137 

actually  proposed  to  exercise  that  right.  It  was  the 
latter  statement  that  Mr.  William  H.  Preece  denom- 
inated an  "absolute  fallacy."  As  a  matter  of  fact  the 
Post  Office  had  claimed  the  legal  power  to  lay  under- 
ground any  kind  of  wire  for  any  person,  but  it  never 
had  proposed  to  do  anything  more  than  lay  wires  for 
the  purpose  of  connecting  its  own  trunk  line  exchanges 
with  the  National  Telephone  Company's  local  ex- 
changes.^ 

In  March,  1898,  Mr.  J.  S.  Forbes,  President  Na- 
tional Telephone  Company,  wrote  as  follows  to  Sir  H. 
D.  Davies,  Lord  Mayor  of  London,  and  M.  P.  for 
Chatham :  "My  colleagues  ....  and  myself  will  be  the 
first  to  admit  that  the  service  as  at  present  conducted 
leaves  much  to  be  desired,  but  why?  Not  for  want  of 
will  on  the  part  of  the  Company,  nor  for  want  of 
money  and  skill  to  cope  with  the  business ;  but  for  the 
want  of  those  reasonable  facilities  ....  without  which 
Why  London  n^as  '^  is  impossible  to  conduct  the  business 
Badly  Served  ^vith  the  highest  efficiency.  It  is  singu- 
lar that  in  this  matter  [Metropolitan]  London,  gener- 
ally so  advanced,  should  lag  behind  Liverpool, 
Manchester,  Birmingham,  Leeds  and  many  other  large 
cities  and  towns  in  which  the  Company  has  succeeded, 
by  agreement  with  the  authorities,  in  securing  upon 
moderate  and  reasonable  terms  the  necessary  use  of  the 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  4032 
to  4054,  Mr.  A.  C.  Morton;  q.  5338,  Mr.  W.  H.  Preece;  and  q.  305 
to  333,  and  6934  to  6951,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 


138         THE    TELEPHONE    IN    GREAT    BRITAIN 

streets  for  laying  the  wires  underground,  to  the  im- 
mense advantage  of  the  users  of  the  telephone,  owing 
to  the  marked  improvement  in  promptness  and  efficiency 
of  all  kinds  which  has  immediately  followed.  It  is 
true  that  in  some  few  cases  such  powers  have  been 
granted  in  disconnected  portions  of  the  London  area; 
but  apart  from  this  the  Company's  net-work  of  lines 
accommodating  now  close  upon  17,500  subscribers, 
exists  upon  sufferance,  and  is  subject  to  constant  inter- 
ference and  interruptions  by  persons  who,  from  caprice 
or  other  motives,  inflict  heavy  loss  upon  the  Company 
and  serious  inconvenience  on  the  subscribers.  Under 
such  a  condition  of  things  perfect  telephony  cannot 
possibly  be  obtained ;  whilst,  of  course,  it  tells  directly 
against  economy  of  working;  and  whilst  it  lasts  the 
telephone  service  must  continue  to  be  both  inefficient 
and  (relatively)  costly."^ 

The  city  of  London  never  gave  the  National  Tele- 
phone Company  way-leaves  in  the  public  streets.  But 
in  November,  1901,  the  Post  Office  made  an  agreement 
with  the  National  Telephone  Company  to  lay  under- 
ground for  the  Company,  on  rental  terms,  such  wires 
as  it  should  suit  the  pleasure  of  the  Post  Office  to  let 
the  Company  have  in  the  City  of  London  and  elsewhere 
in  the  so-called  Metropolitan  London  telephone  area. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  p.  515. 


CHAPTER  XI 
THE  GLASGOW  EPISODE' 

The  National  Telephone  Company  asks  the  Corporation  of 
Glasgow  for  underground  way-leaves,  in  order  that  it  may  re- 
place its  earth-return  circuit  with  a  metallic  circuit,  and  thus  give 
the  public  an  efficient  as  well  as  an  adequate  service.  The  Cor- 
poration refuses  way-leaves,  for  two  reasons.  First,  it  wishes 
the  Company's  service  to  remain  bad,  in  order  that  it  may  create 
a  public  dissatisfaction  which  shall  compel  the  Government  to 
abandon  its  past  policy  of  refusing  to  give  any  local  authority  a 
telephone  license.  Second,  after  obtaining  a  telephone  license, 
Glasgow  proposes  to  install  an  underground  metallic  circuit 
plant,  and  to  destroy  the  Glasgow  plant  of  the  National  Tele- 
phone Company,  that  Company  being  handicapped  by  lack  of 
underground  way-leaves.  In  September,  1897,  the  Government 
appointed  Andrew  Jameson  (now  Lord  Ardwall),  Sheriff  of 
Perthshire,  a  Commissioner  to  inquire  into  the  telephone  service 
at  Glasgow.  The  Commissioner  reported  that  the  continued  in- 
efficiency of  the  telephone  service  at  Glasgow  for  the  most  part 
was  due  to  the  Corporation's  refusal  to  give  the  National  Tele- 
phone Company  underground  way-leaves ;  that  such  refusal  was 
neither  reasonable  nor  justifiable  on  grounds  of  public  policy  or 
any  other  grounds,  unless  it  be  deemed  that  the  Corporation 
were  justified  in  their  refusal  because  they  desired  to  establish  a 
municipal  telephone  system,  and  to  place  the  National  Telephone 
Company  "at  an  enormous  disadvantage"  in  competing  with  them 
for  the  patronage  of  the  public. 

I  Report  addressed  to  the  Lords  Commissioners  of  Her  Majesty's 
Treasury  by  Andreiv  Jameson.  Q.  C,  Sheriff  of  Perthshire.  Com- 
missioner appointed  to  inquire  into  the  Telephone  Exchange  Sen'ice 
in  Glasgow,  together  with  Minutes  of  Evidence.  1897.  Ardwall, 
Lord,  Andrew  Jameson  ;  Senator  of  College  of  Justice  in  Scotland 
since  1905  ;  Sheriff  of  Roxburgh.  Berwick  and  Selkirk,  1886  to  1890; 
Sheriff  of  Ross.  Cromarty  and  Sutherland.  1890  to  1891  :  Sheriff  of 
Perthshire,    i8gi   to   1905.     Who's   Who.   1906. 

139 


140         THE    TELEPHONE    IN   GREAT    BRITAIN 

In  the  year  1891,  the  Corporation  of  Glasgow  ol> 
tained  from  ParHament  a  Private  Act  authorizing  the 
Corporation  to  install  electric  street  railways.  Upon 
the  request  of  the  National  Telephone  Company,  Parlia- 
ment inserted  in  the  Act  a  clause  obliging  the  Corpora- 
tion so  to  construct  its  electric  tramways  as  not  to 
injure  the  National  Telephone  Company's  property  by 
^  ,.  J  r^  J  causing  induction  currents  in  the  Com- 
phone  Company's  pany's  wires.  The  protection  given  the 
Protective  Clauses  National  Telephone  Company  was 
limited  to  two  years,  on  the  theory  that  in  that  space 
of  time  the  Company  could  convert  its  earth-return 
system  to  the  metallic  circuit  system,  which  latter  would 
not  be  injuriously  affected  by  the  currents  employed  by 
electric  tramways.  But  the  Company  could  not  obtain 
underground  way-leaves  in  the  streets,  and  therefore 
it  took  no  steps  to  convert  its  property  to  the  metallic 
circuit  system.  The  Corporation,  on  the  other  hand, 
advertised  for  bids  for  the  construction  of  seven  miles 
of  electric  street  railway,  the  contractor  to  assume  all 
the  obligation  incurred  by  the  city  under  the  protective 
clause  secured  by  the  National  Telephone  Company. 
No  contractor  proved  willing  to  assume  that  obligation, 
and  the  city  abandoned  its  electric  tramway  scheme. 
In  1894  or  1895,  the  National  Telephone  Company 
again  secured  a  two-year  protective  clause;  and  in 
1897,  Mr.  James  Colquhoun,  Treasurer  of  the  Corpora- 
tion of  Glasgow,  asserted  before  Commissioner 
Jameson  that  the  protective  clauses  given  the  National 


THE  GLASGOW  EPISODE  Ul 

Telephone  Company  had  deterred  Glasgow  irom  in- 
stalling electric  street  railways.  Mr.  Colquhoun's 
assertion  is  contradicted  by  the  fact  that  Glasgow 
waited  until  January,  1899,  before  resolving  to  convert 
its  horse  tramways  to  electric  tramways,  although  the 
protection  given  the  National  Telephone  Company 
expired  in  1896  or  1897.  But  even  if  Mr.  Colquhoun's 
contention  were  supported  by  the  facts,  the  merits  of 
the  dispute  obviously  would  be  with  the  National  Tele- 
phone Company.  It  would  have  been  entirely  unreason- 
able to  ask  the  Company  to  replace  its  house-top  to 
house-top  earth-return  circuit  system  by  a  house-top 
to  house-top  metallic  circuit  system.  The  replacement 
in  question  would  have  been  very  expensive ;  and  even 
at  that  it  would  have  resulted  in  an  inefficient  telephone 
system,  which,  sooner  or  later,  must  have  been  replaced 
by  an  underground  wire  system.  The  reasonableness 
of  the  National  Telephone  Company  throughout  the 
foregoing  dispute  is  indicated  in  the  following  fact : 
The  Company  permitted — though  somewhat  reluctantly 
— its  Parliamentary  Counsel,  Mr.  E.  H.  Pember,  to 
suggest  to  the  Joint  Select  Committee  on  Electric 
Powers  (Protective  Clauses),  1893,  that  the  protection 
given  the  National  Telephone  Company  against  electric 
tramway  companies  be  subject  to  the  following  proviso : 
"Provided  also  that  it  shall  be  sufficient  compliance 
w'ith  the  requirements  of  this  subsection  if  the  [tram- 
way] promoters  in  the  construction  and  maintenance 
of  their  said  works,  and  in  the  working  of  their  said 


142        THE   TELEPHONE   IN   GREAT   BRITAIN 

tramways,  from  time  to  time  adopt  the  best  known 
means  of  insulating  their  conductors  and  other  electrical 
works,  and  of  preventing  injurious  interference  by  in- 
duction or  otherwise  with  such  electric  [telephone] 
circuits  as  aforesaid."^ 

The  refusal  of  the  Corporation  of  Glasgow  to  give 
the  National  Telephone  Company  underground  way- 
leaves  in  this  period  beginning  with  1891,  was  largely 
the  result  of  the  "campaign  of  education"  carried  on  by 
three  local  statesmen,  of  whom  Councillor  Starke  was 
the  most  prominent.  Councillor  Starke,  as  Chairman 
of  the  Special  Committee  on  Telephone  Service,  induced 
Glasgow  acts  on  "^^  ^nly  his  colleagues  upon  the  Special 
an  Anonymous  Committee,  but  even  the  Corporation  of 
Estimate  Glasgow  to  accept  his  statement  that  an 

annoymous  person  had  provided  him  with  "reliable 
estimates  in  detail  .  .  showing  that  for  a  capital  of 
about  $75  per  user,  the  latest  and  best  [telephone]  sys- 
tem can  be  laid  down  in  Glasgow  w^ithin  the  municipal 
radius.  On  this  basis  a  thoroughly  efficient  service 
could  be  given  at  an  annual  charge  of  about  $25  per 
user,  or  possibly  less."  Mr.  Councillor  Starke  never 
made  known  the  name  of  the  person  who  had  prepared 
the  "reliable  estimates  in  detail."  There  is  some  doubt 
whether  he  ever  submitted  those  estimates  to  his  col- 

^  Glasgow  Telephone  Inquiry,  1897;  q.  4529  to  4535,  Mr.  J. 
Colquhoun ;  q.  4008  to  4011,  Mr.  S.  Chisholm  ;  p.  221,  Mr.  E.  T. 
Salvesen,  of  counsel  to  Glasgow  Corporation  ;  and  Report  from  the 
Joint  Select  Committee  on  Electric  Poivers  (Protective  Clauses), 
1893;  p.  204,  Mr.  E.  H.  Pember ;  and  q.  1316  to  1324,  Mr.  W.  H. 
Winterbotham,    Solicitor    to    National   Telephone    Company. 


THE  GLASGOW  EPISODE  143 

leagues  on  the  Special  Committee  on  Telephone  Serv- 
ice. But  there  is  no  doubt  that  the  Special  Committee 
kept  no  record  of  the  estimates,  which  nexer  were  put 
before  the  Corporation.^  And  yet,  upon  the  strength 
of  Mr.  Starke's  bare  statement,  the  Corporation  of 
Glasgow  applied  to  the  Postmaster  General  for  a  tele- 
phone license,  and  denied  the  National  Telephone  Com- 
pany all  way-leaves  in  the  streets. 

Before  the  Select  Committee  of  1892,  Mr.  J.  S, 
Forbes,  Chairman  National  Telephone  Company,  testi- 
fied as  follows :  "I  should  like  at  once  to  make  an 
admission.  I  am  prepared  to  concede  at  once  that  the 
National  Telephone  Company,  which  conducts  about 
93  or  94  per  cent,  of  the  whole  telephone  business  of 
the  country,  conducts  a  great  deal  of  it  monstrously 
badly,  but  it  is  not  their  fault,  it  is  the  fault  of  Parlia- 

,    .  ment.     I  should  like  to  follow  that  by 

National  Tele- 
phone Com-  saying    that    London,    Liverpool    and 

pany  Admits         many    other    large   centers    cannot   be 

efficiently  served  without  what  is  called 

a  twin-wire  or  metallic  circuit  system."^     Before  that 

same  Committee,  Mr.  W.  Winterbotham,  Solicitor  to 

National  Telephone  Company,  referred  specifically  to 

the  conditions  in  Glasgow  in  support  of  his  argument 

^Glasgozv  Telephone  Inquiry,  iSg? ;  Mr.  J.  Alexander,  Bailie 
and  Chairman  of  Telephone  Committee,  q.  3151  to  3170,  and  3214. 
to  3222 ;  Mr.  S.  Chisholm,  Bailie,  q.  4070  to  4081  :  and  p.  295, 
Councillor   Starke's  Memorandum. 

-Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  366. 


144         THE   TELEPHONE    IN    GREAT    BRITAIN 

that  the  Company  must  have  underground  way-leaves. 
He  stated  that  over  3,000  wires  radiated  from  the 
Central  Exchange  in  Glasgow ;  that  the  Company  de- 
sired to  run  those  wires  underground  in  large  masses, 
spreading  them  overhead  only  when  they  began  to 
branch  off  to  the  several  subscribers'  premises.^ 

In  1895,  Mr.  J.  S.  Forbes,  Chairman  National  Tele- 
phone Company,  testified  as  follows  before  the  Select 
Committee  on  the  Telephone  Service :  "We  cannot 
carry  out  the  works  [i.e.,  conversion  to  metallic  cir- 
cuit] without  the  concurrence  of  the  authorities  in  a 
place  like  Glasgow,  and  I  venture  to  suggest  to  the 
Committee  (in  fact,  I  pledge  the  National  Telephone 
Company)  that  we  are  ready  at  all  costs  to  give 
Glasgow  the  best  service  that  can  be  got,  a  metallic 
circuit,  if  we  can  be  assured  of  the  concurrence  of  the 
authorities  to  enable  us  to  do  what  must  be  done  to 
give  it,"^  namely,  to  go  underground. 

The  difficulties  under  which  the  National  Telephone 
Company  labored  in  Glasgow  because  of  the  lack  of 
underground  way-leaves,  were  further  aggravated  by 
the  following  incident :  "When  the  trunk  wire  agree- 
ment was  signed  in  1896,  with  the  exception  of  the 
South  of  England,  the  Government  was  not  prepared 
to  take  over  the  working  of  the  trunk  lines,  and  a  tem- 

^  Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  418  to  422. 

-  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  q.  4282. 


THE  GLASGOW  EPISODE  145^ 

porary  arrangement  had  to  be  made,  by  which  the  Com- 
pany were  to  work  them  for  a  considerable  time,  but  in 

the  course  of  the  same  year  the  Govern- 

A  Generous  Act  ^    ,      i  .1  1  •  r    .1 

ment    took    over   the   workmg   of   the 

whole  of  them  and  then  they  were  in  this  dilemma,  that 
they  had  not  trained  operators  to  work  them.  I  [Mr. 
Gaine]  was  asked  by  the  Post  Office  to  consent  to  a 
large  number  of  our  best  and  most  skilled  operators 
being  transferred  to  them,  and  in  the  case  of  Glasgow, 
24  of  the  best  operators^  in  the  Royal  Exchange  Build- 
ing were  transferred  to  the  Post  Office  building.  I  am 
bound  to  say  that  it  did  have  a  serious  effect  on  the 
local  service  to  witkdraw  24  of  the  most  skilled  opera- 
tors. That  was  a  somewhat  serious  demand,  and  there 
has  been  a  difficulty  in  filling  their  places.  The  question 
was,  which  of  the  two  was  to  sufifer,  the  trunk  service 
or  the  local  service,  and  strong  pressure  was  brought 
to  bear  on  me  to  consent  to  the  transfer  of  these 
operators,  and  I  did  so."^ 

On  February  26.  1896,  the  General  Manager  of  the 
National  Telephone  Company  applied  to  the  Corpora- 
tion of  Glasgow  for  underground  way-leaves.  He 
wrote:  "As  regards  the  interference  with  the  streets, 
the  Company  has  no  desire  to  obtain  any  rights  therein 
adverse  to  the  Corporation,  nor  is  it  material  to  the 

^  In  October,  1807,  there  were  iii  operators  in  the  Royal  Ex- 
change. Glasgow  Telephone  Inquiry,  i8o7  ;  Q-  6766,  Miss  Macfar- 
lane,  chief   operator. 

'Glasgow  Telephone  Inquiry,  1897;  q.  7506,  Mr.  W.  E.  L.  Gaine, 
General    Manager    National    Telephone    Company. 

10 


146         THE   TELEPHONE   IN   GREAT   BRITAIN 

Company  what  method  of  procedure  is  adopted   for 

getting  the  work  done.     The  necessary  pipes  in  the 

streets  can,  if  thought  expedient,  be  put  down  by  the 

Corporation,  and  leased  to  the  Company 
Company  again  '-  r      j 

Refused  Way-  upon  reasonable  terms,  to  be  agreed 
leaves  upon,  or  they  can  be  put  down  by  the 

Corporation  by  its  own  workmen  or  through  a  con- 
tractor at  the  expense  of  the  Company,  or  they  can 
be  put  down  by  the  Company  under  the  supervision  of 
the  Corporation."  In  due  time  he  was  informed  that 
his  letter  had  been  handed  to  the  Clerk  of  the  Police 
Department,  that  Department  having  control  of  the 
streets.  Not  having  heard  anything  further,  the 
General  Manager  of  the  National  Telephone  Company 
on  April  29th  inquired  what  had  become  of  his  applica- 
tion. On  the  following  day  he  was  informed  that  the 
Committee  having  charge  of  the  streets  "had  not  yet 
formed  any  resolution  on  the  subject."  On  June  18, 
the  General  Manager  again  inquired  whether  the  Com- 
mittee had  yet  come  to  a  decision.  On  the  following 
day  the  Committee  "resolved  to  let  the  matter  lie  on  the 
table." 

On  January  15,  1897,  a  deputation  from  the  Na- 
tional Telephone  Company  waited  upon  the  Statute 
Labor  Committee  of  the  Corporation  of  Glasgow.  Mr. 
W.  A.  Smith,  a  Director  of  the  Company,  stated  "that 
owing  to  the  enormous  increase  of  subscribers,  the  old 
system  of  overhead  wires  had  become  unwieldy,  and, 
with  the  best  will  in  the  world,  it  was  now  impossible 


THE  GLASGOW  EPISODE  147 

to  give  their  vast  mass  of  subscribers  an  equally  good 
service  overhead  as  was  possible  when  the  subscribers 
were  fewer;  and  that,  in  order  to  reap  the  full  benefit 
of  the  great  expenditure  on  trunk  lines,  both  by  the 
Company  and  (since  the  acquisition  by  the  Post  Office) 
by  the  Government,  it  had  become  absolutely  necessary 
to  have  underground  way-leave  facilities.  .  .  .  The  Com- 
pany were  ready  and  willing  to  pay  a  reasonable  rental 
to  the  Corporation  for  the  facilities  they  accorded ;  they 
were  willing  to  pay  it  either  in  the  form  of  a  lump  sum, 
or  of  a  reasonable  charge  per  subscriber ;  and  being  a 
Company  established  not  for  philanthropic  but  for  busi- 
ness purposes,  they  were  quite  sure  that  the  Corpora- 
tion would  not  make  anything  more  than  a  reasonable 
business  charge,  which,  as  before  stated,  the  Company 
were  ready  and  willing  to  pay.  ...  In  conclusion  he 
wished  to  emphasize  the  fact  that  the  Company  did  not 
wish  the  Corporation,  in  any  sense  of  the  word,  to  grant 
what  may  be  called  a  monopoly.  The  Corporation  would 
retain  full  rights  to  give  other  underground  way- 
leaves  ;  and,  further,  as  an  evidence  of  reasonable  trust 
in  the  business  judgment  of  the  Corporation,  the  Com- 
pany would  be  willing  to  place  themselves  so  far  in  the 
hands  of  the  Corporation  that  at  any  future  time  the 
Corporation,  on  giving  due  notice,  and  after  hearing 
the  Company,  might  pass  a  special  resolution  to  rescind 
such  underground  way-leaves :  but,  of  course,  it  must 
be  pointed  out  that  the  expenditure  of  a  large  sum, 
amounting  to  probably  $625,000,  could  not  possibly  be 


148         THE   TELEPHONE   IN    GREAT    BRITAIN 

made  unless  on  some  reasonable  understanding  that 
such  an  option  would  not  be  exercised  in  any  undue 
or  arbitrary  manner.  Should  the  permission  be  granted, 
the  Company  would  bind  themselves  to  lay  down  the 
most  perfect  system  of  twin-wire  communication  that 
it  is  possible  for  science  to  devise ;  and,  furthermore, 
that  they  had  already  so  far  anticipated  the  adoption 
of  this  system  as  to  prepare  their  new  switchboard,  at 
a  cost  of  $125,000,  so  that  it  could  be  adapted  to  the 
twin-wire  system  without  loss  of  time."  .  . 

Five  weeks  later,  on  February  23,  1897,  the  Clerk 
of  the  Police  Department  wrote  the  National  Telephone 
Company  this  short  note.  "I  have  now  to  inform  you 
that,  after  careful  consideration,  the  Corporation 
Police  Department  have  resolved  that  the  request  of  the 
National  Telephone  Company  for  way-leave  to  put 
down  underground  wires  in  the  streets  of  the  city  be 
refused."^ 

Tn  September,  1897,  or  thereabout,  the  Lords  Com- 
missioners of  Her  Majesty's  Treasury  appointed 
Commissioner  Andrew  Jameson,^  O.  C,  Sheriff  of 
appointed  to  Perthshire,  a  Commissioner  to  inquire 

nqutre  -^^^^  ^|^^  Telephone  Exchange  Service  in 

Glasgow.  The  Corporation  of  Glasgow,  since  August, 
1893,  had  repeatedly  applied  to  the  Postmaster  General 

^  Glasgoiv  Telephone  Inquiry,   1897,  p.   252. 

'Who's  Who,  1906,  Ardwall,  Lord,  Andrew  Jameson;  Senator 
of  College  of  Justice  in  Scotland  since  1905;  Sheriff  of  Roxburgh, 
Berwick  and  Selkirk,  1886  to  1890;  Sheriff  of  Ross,  Cromarty  and 
Sutherland,    1890-91  ;    Sheriff   of   Perthshire    1891    to    1905. 


THE  GLASGOW  EPISODE  149 

for  a  telephone  license  for  the  area  of  Glasgow, 
alleging  that  the  existing  service  was  inefficient,  inade- 
quate and  unreasonably  dear. 

The  first  question  submitted  to  the  Commissioner 
was:  "Is  the  service,  so  far  as  it  goes,  efficient?" 
Thereon  the  Commissioner  reported :  "I  am  of  the 
opinion  that  the  service  is  not  efficient.  This  ineffi- 
ciency I  believe  to  be  mainly  due  either  directly  or  in- 
directly to  the  want  of  a  metallic  [twin-wire]  circuit, 
but  a  very  considerable  proportion  out  of  the  enormous 
Service  not  mass  of  the  complaints  which  are  proved 

Efficient  to  have  been  made  from  time  to  time  to 

the  Telephone  Company  are  not  referable  to  that  cause 
alone,  and  might  have  been,  in  my  opinion,  to  a  con- 
siderable extent  remedied  by 'more  thorough  supervision 
in  the  Central  and  Junction  Switch  Rooms,  and  by 
more  care  being  taken  in  leaving  spaces  between  outside 
wires,  regarding  which  it  was  from  time  to  time 
brought  to  notice  of  the  Company's  officials,  that  they 
were  in  contact,  and  by  again  taking  other  similar  pre- 
cautionary measures.  .  .  .  Again,  the  contact  of  certain 
wires  with  other  wnres  is  apparently  sometimes 
remedied  after  complaint,  but  with  so  little  thorough- 
ness, that  the  same  contact  takes  place  soon  after,  some- 
times without  any  apparent  cause,  sometimes,  it  is  said, 
owing  to  the  change  of  weather  from  dry  to  wet,  or 
the  occurrence  of  a  high  wind.  Of  course  in  consider- 
ing the  evidence  .  .  .  several  things  require  to  be  kept  in 
mind : — The   complaints   as   to   buzzing   and   rasping 


150         THE    TELEPHONE    IN    GREAT    BRITAIN 

noises  preventing-  the  proper  use  of  the  telephone ;  in- 
distinctness in  hearing  or  making  oneself  heard;  over- 
hearing voices  and  conversations  from  other  wires ; 
cessation  of  communication  with  the  exchange,  owing 
to  contact  with  another  wire  or  from  leakages  caused 
by  storm  and  similar  defects,  is  probably  all  more  or 
less  due  to  and  inseparable  from  a  single  wire  overhead 
system  with  an  earth  circuit,  especially  in  a  city  such 
as  Glasgow,  which,  as  admitted  by  the  witnesses  on 
both  sides,  is  in  circumstances  unfavorable  for  the  work- 
ing of  such  a  system.  Among  these  circumstances  may 
be  mentioned  the  prevalence  of  rain  and  fogs  and  the 
quantity  of  finely  divided  particles  of  carbon  in  the 
shape  of  soot  and  smoke  with  which  its  atmosphere  is 
laden  in  time  of  foggy  or  wet  weather. 

"With  regard  to  the  complaints,  to  the  effect  that 
subscribers  are  frequently  unable  to  get  connection  with 
some  other  subscribers  with  whom  they  wish  to  com- 
municate, owing  to  the  wire  being  rightly  or  wrongly 
said  to  be  engaged,  I  think  it  is  impossible  to  attach 
much  importance  to  these  complaints.  It  is  plain  from 
the  evidence,  that  certain  men  of  biJisiness  ....  have  so 
many  persons  who  wish  to  communicate  with  them  .  .  . 
that  it  may  be  quite  impossible  for  some  individual 
to  obtain  connection  ....  without  waiting  for  a  con- 
siderable time,  or  to  obtain  connection  at  all.  .  .  Further, 
it  is  proved  that  subscribers  very  frequently  fail  to 
ring  off,  as  it  is  called,  after  finishing  a  conversation 
with  another  subscriber,  with  the  result  that  that  other 


THE  GLASGOW  EPISODE  151 

subscriber's  wire,  quite  unknown  Icj  him,  remains,  so 
far  as  the  operators  in  the  switch-room  are  concerned, 
engaged.  .  .  .  With  regard  to  the  complaint  that  com- 
munication has  been  cut  off  before  a  conversation  was 
finished,  as  far  as  I  can  make  out  that  has  chiefly 
happened  where  a  subscriber  has  been  in  connection 
with  one  of  the  Post  Office  trunk  Hues,  on  which  only 
three  minutes  of  conversation,  or  six  minutes  of  an 
extended  conversation,  is  allowed,  and  where  the  con- 
nection is  cut  on  the  expiry  of  these  periods.  The 
only  other  causes  of  premature  disconnection  that  sug- 
gest themselves  to  me  from  the  evidence  are  where  an 
operator,  supposing  from  the  length  of  a  conversation 
that  it  must  be  finished,  connects  another  subscriber 
with  a  ware  that  is  really  engaged,  or  where  during 
time  of  wind  one  wire  is  blown  against  another,  and 
the  electrical  current  is  diverted  by  the  contact.  .  .  .  The 
Telephone  Company  also  draw  attention  to  the  proved 
facts  that  subscribers  frequently  make  it  impossible 
for  the  operator  properly  to  attend  to  her  business  by 
bawling  along  the  call  w  ire  at  the  same  time  with  other 
subscribers,  and  using  the  call  wire  for  abusing  the 
operators,  and  frequently  using  very  violent  and  brutal 
language  to  them,  so  much  so  that  at  times  they  drive 
them  into  hysterics.  Then,  again,  there  seems  little 
doubt  that  the  instruments  are  frequently  ill-used  by 
the  subscribers.  ...  On  the  whole  matter  my  opinion 
is  that  while  the  inefficiency  of  the  present  system  is 
chiefly  due  to  the  overhead  single  wire  arrangement, 


152         THE    TELEPHONE   IN    GREAT    BRITAIN 

yet  the  efficiency  of  the  system  might  have  been  con- 
siderably improved  by  more  thorough  supervision  in 
the  various  switch-rooms,  including  more  prompt  at- 
tention to  complaints  against  the  operators,  and  by 
the  exercise  of  greater  care  and  thoroughness  in 
remedying  defects  in  the  arrangement  of  the  outside 
wires." 

The  second  question  was:  *Is  the  service  adequate? 
That  is  to  say,  are  all  the  inhabitants  who  desire  to 
join  the  Exchange  systems  afforded  facilities  for  doing 
so,  without  undue  conditions  as  to  way-leaves  or  other- 
wise, and  is  there  a  sufficient  number  of  call  offices  to 
meet  the  reasonable  requirements  of  the  public?"  The 
Commissioner  reported  thereon :  "No  witness  was 
Service  is  adduced  who  complained  of  being  jde- 

Adequate  terred     from     joining    the     Exchange 

system  by  any  condition  as  to  way-leave  or  otherwise, 
but  some  of  the  witnesses  for  the  Corporation  expressed 
their  opinions,  for  what  they  were  worth,  upon  two  of 
the  conditions^  which  the  company  are  accustomed  to 
impose  upon  the  subscribers,  the  first  being  in  these 
terms : — 'The  lessee  will  give  to  the  company  every 
facility  in  his  power  in  the  way  of  poles,  attachments, 
etc.,  for  running  his  own  wire,  and  also  those  of  other 
subscribers  to  the  company's  system,  whether  exchange 
or  private,  and  will  permit  the  company  and  its  servants 
at  all  reasonable  times  to  have  free  access  to  the  lessee's 

*  The  Glasgow  Corporation  in  its  official  documents  sometimes 
referred  to  these  conditions  as  "blackmail."  Compare  Glasgow 
Telephone  Inquiry,  1897  ;  p.  296. 


THE  GLASGOW  EPISODE  153 

premises  for  the  purpose  of  erecting,  fixing,  examining, 
repairing,  or  removing  the  said  wires,  apparatus,  poles, 
attachments,  etc'  This  condition  is  rather  amphfied 
in  the  new  form.  The  second  is  the  condition  that  sub- 
scribers should  take  a  five  years'  lease  of  their  instru- 
ment. In  the  absence  of  any  evidence  that  these  con- 
ditions have  been  found  to  work  unfairly  in  practice, 
or  have  tended  to  prevent  inhabitants  from  joining  the 
Exchange  system,  I  am  not  disposed  to  attach  much 
importance  to  these  opinions.  I  do  not  see  anything 
unfair  in  a  person  who  uses  the  telephone  himself  being 
requested  to  give  facilities  for  extending  its  use  to 
others;  while  with  regard  to  the  five  years'  condition, 
it  seems  not  unreasonable  that  the  Company  should 
decline  to  be  at  the  expense  of  putting  up  a  wire  in  con- 
nection with  their  Exchange,  without  some  security 
that  the  expense  will  not  be  practically  thrown  away 
by  the  subscriber  leaving  his  premises  at  the  end  of  a 
short  period.  As  to  the  number  of  call  offices,  ....  my 
own  opinion  is  that  the  number  of  call  offices  is  sufficient 
to  meet  the  reasonable  requirements  of  the  public." 

The  third  question  was :  *Ts  the  price  charged  for 
the  service  reasonable?"  Hereon  the  Commissioner 
reported:  "It  appears  to  me  that  these  rates  are  not 
unreasonable,  except  where  they  come  to  be  applied  to 
some  of  the  outlying  districts,  ....  in  which  cases  I 
think  they  ought  to  be  reduced.  But  speaking  gener- 
ally, I  may  notice  that  the  rate  is  what  is  called  a  $50 
rate  for  places  of  business  within  half  a  mile  of  the 


154         THE    TELEPHONE    IN    GREAT    BRITAIN 

Charges  not  Exchange,  which  was  the  Post  Office 

Unreasonable  Telephone  Rate  for  distances  between 
a  quarter  and  half  a  mile  up  to  October  of  the  present 
year,  when  a  reduction  has  taken  place  to  $40;  but  in 
comparing  the  Telephone  Company's  charges  with  the 
Post  Office,  it  has  to  be  remembered  that  the  Telephone 
Company  have  to  pay  a  royalty  of  10  per  cent,  on  their 
gross  receipts,  and  at  the  present  time  that  represents 
an  annual  charge  of  almost  $500,000  a  year.  Besides, 
the  Company's  license  expires  on  December  31,  191 1, 
....  but  the  example  which  all  the  Corporation  wit- 
nesses fall  back  on  as  the  standard  for  Glasgow  is 
Stockholm,  and  they  assume  that  Stockholm  is  properly 
comparable  with  Glasgow.  For  my  own  part,  I  can 
hardly  imagine  two  more  dissimilar  places  in  almost 
every  conceivable  respect.  .  ,  .  But  it  was  said  by  some 
of  the  Corporation  witnesses  that  a  $25  rate  was  sup- 
ported by  the  experience  of  the  first  Telephone  Com- 
pany in  Dundee,  and  of  the  Mutual  Telephone  Company 
in  Manchester.  .  .  .  But  w4ien  cross-examined  ...  it 
appears  that  his  information  was  derived  from  Ex- 
Provost  Moncur,  who  in  his  examination  before  the 
Select  Committee  in  1895  stated  that  if  the  original 
Dundee  Company  had  gone  on  they  would  not  have 
been  able  at  the  $27.50  rate,  to  have  paid  anything  at 
all.  While  with  regard  to  the  Mutual  Telephone  Com- 
pany of  Manchester,  I  think  Mr.  Forbes'  evidence, 
taken  along  with  that  of  Mr.  Sinclair,  who  inspected 
the   plant,   and    Mr.   Anns,   who   was   Liquidator   of 


THE  GLASGOW  EPISODE  155 

the  Mutual  Company,  shows  that  that  Company  was 
being  financed  in  such  a  way  as  to  have  inevitably  led 
to  bankruptcy  upon  the  $25  rate,  and  was  never  really  in 
a  position  to  pay  the  dividend.  Specimens  of  the  plant, 
chiefly  plugs,  wires  and  jacks,  used  by  the  Mutual 
Telephone  Company,  were  produced  at  the  Inquiry,  and 
were  of  the  cheapest  and  most  flimsy  description  pos- 
sible, and  not  at  all  comparable  to  the  plant  used  in 
Glasgow  by  the  National  Telephone  Company."  .... 

The  fourth  point  referred  to  the  Commissioner  was : 
"If  there   is  either  inefficiency  or   inadequacy  in  the 

service,  or  if  the  price  charged  for  the 
Earth-return  .  .  .,,         , 

Circuit  Main         service  IS  too  high,  you  will  endeavor 

Cause  of  to  ascertain  whether,  and  how  far,  this 

is  due  to  the  refusal  of  facilities  on  the 
part  of  the  Municipal  or  other  local  authorities  or  the 
inhabitants.  You  will  also  consider  how  far  such  re- 
fusal is  reasonable  or  justifiable  on  grounds  of  policy 
or  otherwise."  The  Commissioner  reported :  "As 
stated  in  my  observations  on  Question  i,  I  am  of  opin- 
ion that  the  main  cause  of  the  inefficiency  of  the  present 
Telephone  Exchange  Service  in  Glasgow  is  that  it  is 
worked  by  means  of  an  overhead  single  wire  system, 
with  an  earth-return  current,  in  a  city  where  there  is 
an  enormous  amount  of  concentration  of  wires  to  one 
point,*  greater  even  than  exists  at  any  one  point  in 
London,  and  where,  owing  to  climate  and  the  system 


'.At   this   time   3,753   overhead    wires   radiated   from   the   Central 
Exchange. 


156         THE   TELEPHONE   IN    GREAT   BRITAIN 

of  electric  lighting  in  one  of  the  underground  railways, 
an  overhead  system  is  peculiarly  liable  to  be  rendered 
inefficient.  Further,  it  appears  that  the  Corporation 
are  intending  gradually  to  establish  an  electric  trolley 
system  by  means  of  overhead  wires,  for  the  purpose  of 
working  their  tramways.  .  .  .  The  result  of  this  would 
undoubtedly  be  greatly  to  increase  the  difficulties  of 
the  working  of  the ....  present  overhead  [telephone] 
system,  and,  indeed,  to  render  it  unworkable  altogether 
in  the  neighborhood  of  the  Tramway  electric  wires. 
Of  course,  this  might  to  some  extent  be  obviated  by  the 
Company  making  an  overhead  twin-wire  system,  but 
I  think  it  would  be  most  unreasonable  to  require  them 
to  do  so.  In  the  first  place,  it  would  greatly  increase 
the  strain  upon  the  standards  and  roofs  to  which  the 
wires  are  fixed,  and  increase  the  risks  from  possible 
accidents  from  breaking  of  wires  and  cables,  etc.,  in 
times  of  storm,  and,  of  course,  would  be  liable  to 
the  interruptions  which  attend  the  present  system 
through    alterations    of   buildings,    fires,    and   similar 

causes Then,    again,   the    construction   of   such    a 

system  would  be  enormously  more  expensive  than  the 
construction  of  an  underground  metallic  circuit,  and 
would  not  be  nearly  so  efficient.  The  National  Tele- 
phone Company  resolved  in  February  of  last  year  to 
introduce  the  metallic  underground  circuit  in  Glasgow, 
and  on  February  25,  1896,  addressed  a  letter  to  Sir 
James  Warwick,  Town  Clerk,  asking  the  assistance  of 
the    Corporation.     Upon    that   a    correspondence    fol- 


THE  GLASGOW  EPISODE  157 

lowed,  from  which  it  appears  that  the  Corporation  of 
Glasgow  and  its  Police  Committee  have  been  respon- 
sible for  very  unnecessary  delay  in  the  matter,  and 
which  closes  with  a  letter  of  February  23,  1897,  with 
the  following  terms :  'I  have  now  to  inform  you  that, 
after  careful  consideration,  the  Corporation  Police  De- 
partment have  resolved  that  the  request  of  the  National 
Telephone  Company  for  any  way-leave  to  put  down 
underground  wires  in  the  streets  of  the  city  be  re- 
fused.' "  The  Commissioner  continues :  "My  opinion 
accordingly,  is  that  the  continued  inefficiency  of  the 
present  Telephone  Exchange  Service  in  Glasgow  is  in 
a  great  measure  due  to  the  refusal  of  facilities  to  the 
National  Telephone  Company  by  the  Corporation  of 
Glasgow  for  constrvicting  an  underground  metallic  cir- 
cuit system.  I  do  not  require  at  present  to  consider 
the  action  of  some  of  the  small  Municipal  authorities 
in  the  neighborhood  of  Glasgow, ....  because  their 
attitude  seems  at  present  to  be  that  of  waiting  to  see 
whether  the  Corporation  of  Glasgow  will  get  a  license 
and  supply  them  with  a  telephone  system  at  a  $25  rate, 
in  which  case  apparently  they  are  prepared  to  give  the 
Corporation  way-leave  under  the  streets  of  their  re- 
spective burghs,  and  would  refuse  it  to  the  National 
Refusal  of  Telephone  Company ....  In  the  mean- 

Way-leaves  time,  therefore,  I  propose  to  deal  with 

Unreasonable  ^j^^  question  whether  the  refusal  on  the 
part  of  the  Glasgow  Corporation  is  reasonable  or  justi- 
fiable on  grounds  of  policy  or  otherwise.     As  it  is  im- 


158        THE   TELEPHONE   IN   GREAT   BRTrAlN 

portant  to  see  precisely  what  the  Members  of  the  Cor- 
poration who  were  put  forward  as  supporting  its  views 
say  on  this  matter,  I  shall  refer  to  them  in  some  detail. 
Bailie  Chisholm,  after  stating  that  the  water,  gas,  elec- 
tric lighting  and  tramways  were  all  managed  in  Glas- 
gow by  the  Corporation,  and  that  these  necessitate  the 
use  of  the  streets  by  the  Corporation,  says  that  he  thinks 
it  highly  inexpedient  for  a  private  company  to  have 
the  use  of  the  streets.  Further  on  this  passage  occurs 
in  his  evidence :  'In  coming  to  that  conclusion,  is  it 
not  the  fact  that  you  had  in  view  that  you  were  your- 
selves making  an  application  for  a  [telephone]  license, 
and  therefore  would  not  grant  the  Telephone  Com- 
pany's application?'  'We  had  that  along  with  a  great 
many  others,  and  that  contributed  with  these  other 
factors  to  lead  us  to  the  conclusion  to  which  we  came.' 
'You  had  in  view  the  fact  that  you  were  applying  for 
a  license?'  'Yes.'  Then  he  says:  'We  object,  first  of 
all,  as  I  said,  to  increasing  the  number  of  underground 
pipes  and  conduits,  and  especially  to  a  company  work- 
ing solely  for  profit ;  and  we  object  also  because  when 
once  this  company  gets  in  there  will  be  no  getting  them 
out,  even  if  we  wish  it.'  But  when  he  is  questioned 
as  to  whether  any  serious  inconvenience  would  be 
caused,  his  objections  come  to  very  little.  Further  on 
it  appears  that  one  of  his  main  grounds  for  objecting 
to  give  the  Telephone  Company  the  use  of  the  streets 
is  the  high  rates  charged  by  the  Telephone  Company. 
He  is  asked :  'You  were  wanting  to  make  an  explana- 


THE  GLASGOW  EPISODE  15!) 

tion?'  'If  the  company  comes  to  us  and  asks  tor  fa- 
cilities which  will  enable  them  to  do  their  work  cheaper, 
and  not  give  us  the  telephone  any  cheaper,  then  we 
have  no  inducement  to  consider  their  proposal  for  a 
moment.'  Then  Councillor  John  Macfarlane,  who  is 
Chairman  of  the  Statute  Labor  Committee,  who  has 
charge  of  the  streets  and  roadways  of  the  City,  says 
that  he  thinks :  'it  would  be  unfortunate  for  any  other 
authority  to  have  liberty  in  a  large  Corporation  such 
as  this  to  go  into  the  streets  at  all.'  He  says,  'I  think 
there  should  be  only  one  leading  authority  in  an  im- 
mense municipality  like  Glasgow.  There  would  be 
sure  to  be  friction.'  'Even  if  the  control  of  the  streets 
were  left  entirely  in  the  hands  of  the  Corporation, 
would  that  satisfy  you?'  'No.'  'Why?'  'We  have 
a  strong  feeling  that  no  company  earning  a  dividend 
should  have  power  to  go  through  our  streets.  We  feel 
that  we  would  be  parties  to  earning  them  a  larger  divi- 
dend, and  as  a  public  authority  we  consider  we  have  no 
right  to  do  so.' ....  He  admits  that  the  annoyance  of 
opening  the  streets,  as  far  as  concerned  street  passen- 
gers, would  be  the  same  if  the  Corporation  laid  an 
underground  telephone  system  as  if  it  was  done  by  the 
company,  and.  .  .  .he  practically  gives  up  the  objection 
to  the  inconvenience  of  taking  up  the  streets,  and  falls 
back  upon  his  objection  of  giving  the  Glasgow  streets 
to  a  dividend-earning  company.  Going  back  to  hh 
cross-examination,  he  is  asked  to  tell  shortly  the  reasons 
why  the  Statute  Labor  Committee  refused  the  request 


160         THE    TELEPHONE   IN   GREAT    BRITAIN 

....  and  to  this  he  answers :  The  main  reason  was 
that  they  would  not  allow  a  dividend-earning  company 
to  monopolize  the  streets,'  and ....  he  says,  'I  gave  other 
reasons,  and  those  were  that  this  was  a  dividend-earn- 
ing company,  and  we  had  no  right  to  grant  our  streets 
to  such  a  company  for  the  purpose  of  assisting  them 
to  earn  a  dividend;'  and  he  explains  that  he  had  been 
advised  in  point  of  law  that  they  had  no  power  to  do 
so.  I  may  remark  that  if  such  advice  was  given  it  was 
in  my  opinion  quite  erroneous,  especially  if  the  Com- 
pany were  to  pay  the  Corporation  a  sum  for  way-leaves, 
which  they  are  willing  to  do ...  .  The  next  important 
Member  of  the  Town  Council  who  is  examined  on  this 
matter  is  Treasurer  James  Colquhoun,  who ....  bases 
his  objection  to  giving  the  Telephone  Company  leave 
to  go  under  the  streets  on  the  fact  that  they  have  not 
succeeded  in  getting  Parliamentary  sanction  to  doing 
so;  but  on  Questions  4483  and  4484,  he  states  his  own 
views  most  distinctly  in  the  following  terms :  'Does 
your  objection  apply  to  all  companies  of  a  private  na- 
ture existing  for  profit?'  T  have  a  strong  conviction 
that  wherever  a  business  like  the  telephone  business  be- 
comes a  matter  of  practical  utility,  and  of  great  use  to 
the  public,  and  whenever  a  business  of  that  kind  re- 
quires to  be  carried  on  by  means  of  using  the  public 
streets,  and  when  these  two  considerations  concur  with 
the  business  becoming  a  practical  monopoly,  the  con- 
duct of  that  business  ought  to  be  in  the  hands  of  the 
Municipality  or  the  Government.'     'And  these  elements 


THE  GLASGOW  EPISODE  161 

are  present  in  the  Telephone  Industry?'  'Yes.  The 
business  is  one  of  manifest  importance  to  the  pubhc, 
and  it  is  of  the  nature  of  a  monopoly,  and  it  can  only 
be  carried  on  efficiently  by  use  of  the  streets.'. .  .  .From 
his  answer  to  Question  4498  it  would  seem  that  the 
question  of  the  company's  rates  entered  largely  into 
view  in  refusing  them  the  use  of  the  streets.  Question 
4498  is  in  these  terms :  Tn  view  of  the  information 
obtained  from  experts,  did  you  consider  that  a  suffi- 
cient ground  for  refusing  them  the  use  of  the  streets  ? 
Did  you  think  it  right  to  allow  a  company  that  would 
charge  $50  per  telephone  the  use  of  the  streets,  when 
you  were  informed  that  a  better  service  could  be  sup- 
plied for  less  than  half  the  money?'  *We  would  have 
been  lacking  in  our  duty  to  the  citizens  if  we  had  given 
them  the  use  of  our  streets,  in  view  of  a  statement  of 
that  kind,  and  in  view  of  the  fact  that  a  proper  tele- 
phone service  could  be  given  for  a  much  less  sum.'  "... 
Upon  all  of  the  foregoing  evidence  the  verdict  of  the 
Commissioner  was :  "It  humbly  appears  to  me  that  this 
Corporation's  evidence  is  self-condemned." 
Evidence  Self-  The  Commissioner  adds :  "So  far  as 

condemned  ^|^g  inconvenience  to  the  public  using 

the  streets  is  concerned,  the  inconvenience  of  the  cor- 
poration laying  an  underground  system  for  themselves, 
and  the  National  Telephone  Company  laying  an  under- 
ground system  under  the  supervision  and  control  of 
the  corporation  would  be  identically  the  same  position. 
As  to  repairs,  it  is  practically  admitted  that  these  can 


163        THE   TELEPHONE   IN   GREAT   BRITAIN 

be  clone  by  means  of  the  manholes, ....  without  any  re- 
lifting  of  the  street  at  all.  Beyond  this,  the  objections 
f,    ,.      ,  ,  seem  to  me  to  be  purely  of  a  sentimental 

sentimental  ^         -' 

and  Fanciful  and  fanciful  kind,  and  the  experiences 
Objections  q£  j-j-jg   Corporation  of   Glasgow  with 

the  Central  Railway  have  no  bearing  upon  the  present 
question ;  the  operation  of  constructing  a  tunnel  suffi- 
cient to  contain  a  double  line  of  rails  under  the  streets 
of  Glasgow  is  a  very  different  one  from  cutting  and 
filling  up  a  track  some  three  feet  deep  by  three  feet 
broad,  with  manholes  at  intervals  for  repairs;  and  if 
the  latter  trifling  operation  were  carried  on  by  the  Cor- 
poration employees  or  under  supervision  of  the  Cor- 
poration's engineers,  I  entirely  fail  to  see  what  cause 
of  complaints  the  Corporation  can  possibly  have.  The 
objection  to  giving  the  leave  to  the  Telephone  Company, 
because  it  is  a  dividend-earning  company,  appears  to 
me  quite  absurd,  when  it  is  considered  that  the  opera- 
tion proposed  is  really  for  the  benefit  of  the  public, .... 
and,  further,  that  the  company  are  willing  to  pay  the 
Corporation  a  sum  in  respect  of  the  leave  to  go  under 
their  streets.  I  may  here  remark  that  the  way  in  which 
Nature  of  some  of  the  Corporations  speak  of  the 

Public's  Property  Streets  as  the  'patrimony'  of  the  City 
in  the  Streets  q£  Glasgow  is  absurd,  whether  regarded 
from  the  point  of  view  of  law,  or  of  fact.  The  solum, 
or  the  property  in  the  land  traversed  by  the  streets,  as 
a  rule,  belongs  to  the  proprietors  on  each  side,  and  the 
streets  are  only  vested  in  the  Corporation  by  Act  of 


THE  GLASGOW  EPISODE  163 

Parliament  for  certain  public  purposes,  the  main  one 
being  the  use  of  the  surface  for  public  traffic,  and  the 
subsidiary  purposes  being  such  as  the  construction  of 
sewers  and  the  laying  of  gas  and  water  pipes.  I  may 
here  quote  the  opinion  of  the  late  Lord  President  In- 
glis,  one  of  the  greatest  lawyers  and  judges  that  ever 
adorned  the  judicial  bench,  in  the  case  of  the  Glasgow 
Coal  Exchange,  Limited,  and  Glasgozv  City  and  Dis- 
trict Railway  Company,  lo  Rettie's  Session  Cases,  p. 
1291 :  'It  was  maintained  on  the  part  of  the  Railway 
Company  that  the  owners  of  the  houses  in  question 
here  were  not,  in  point  of  fact,  owners  of  this  subsoil 
at  all,  but  I  give  no  effect  to  that  argument.  I  think 
the  magistrates,  under  the  Police  Act,  have  right  to  the 
surface  for  all  purposes  of  the  statute,  and  that  they 
have  also  rights  to  the  subsoil  immediately  below  the 
surface  to  such  a  depth  as  is  necessary  for  the  purpose 
of  constructing  sewers,  and  laying  gas  and  water  pipes, 
and  that  everything  beyond  that  remains  the  property 
of  the  owners  under  their  infeftments.' ....  There  seems 
no  good  practical  reason  why  the  Corporation  of 
Glasgow  should  not  give  facilities  to  the  Telephone 
Company  similar  to  those  which  these  other  great  Cor- 
porations have  given.  It  is  certainly  not  proved  that 
the  streets  of  Glasgow  have  any  special  sanctity  which 
requires  to  be  observed  in  a  question  of  this  kind.  As 
to  the  alleged  policy  and  traditions  of  Glasgow.  I  do 
not  think  there  is  much  to  be  said.  It  is  only  of  com- 
paratively recent  years  that  the  gas,  water,  and  tram- 


164        THE   TELEPHONE   IN   GREAT   BRITAIN 

way  undertakings  have  been  taken  over  by  the  Munici- 
Grave  Criticism  pality,  or  that  the  streets  have  been 
of  Inconsistency  vested  in  them, ....  and  all  the  some- 
what high-flown  talk  of  the  Corporation  witnesses 
about  the  necessity  of  retaining  an  absolutel}'^  exclusive 
interest  in  their  streets  is  subject  to  the  very  grave 
criticism  on  the  ground  of  inconsistency/  because  the 
Corporation  itself,  in  applying  for  the  extended  license, 
to  which  I  shall  hereafter  have  occasion  to  refer,  pro- 
poses to  interfere  with  the  streets  of  the  Royal  Burgh 
of  Rutherglen,  which  is  an  older  Burgh  than  Glasgow, 
and  with  the  streets  of  the  independent,  and  sometimes 
hostile,  Burghs  of  Partick,  Govan,  and  others,  in  pre- 
cisely the  same  way  in  which  they  object  to  their  streets 
being  interfered  with  by  the  National  Telephone  Com- 
pany. My  inference  from  the  whole  evidence  is  that 
the  true  cause  of  the  refusal  of  the  Corporation  of 
Glasgow  to  allow  the  National  Telephone  Company  a 
way-leave  under  the  streets  is  that  they  are  resolved, 
if  possible,  to  establish  a  telephone  system  of  their 
own,  by  means  of  which  they  believe  that  they  would 
be  able  to  extinguish  the  National  Tele- 

Corporatton 

mainly  Re-  phone  Company  altogether  so   far  as 

sponsible  for  Glasgow  is  concerned,  and  supply  a 
better  and  cheaper  service  to  the  inhabi- 
tants of  the  present  Glasgow  District  Telephone  area.  .  . 
My  answer  to  this  question,  accordingly,  is  that  the 
continued  inefficiency  of  the  Telephone  service  in  Glas- 

'  Compare  H.  R.  Meyer :     Municipal  Ownership  in  Great  Britain, 
P-  95- 


THE  GLASGOW  EPISODE  165 

gow  is,  for  the  most  part,  tlue  to  the  refusal  of  the 
Corporation  of  Glasgow  to  allow  the  National  Tele- 
phone Company  to  construct  a  metallic  circuit  under- 
ground system  underneath  the  streets  of  the  city,  and 
I  am  further  of  opinion  that  such  a  refusal  is  not  rea- 
sonable or  justifiable,  on  grounds  of  policy  or  other- 
wise, unless  it  be  thought  that  the  Corporation  are  justi- 
fied in  their  refusal,  because  they  desire  to  establish  a 
telephone  system  of  their  own,  and  to  place  the  National 
Telephone  Company  at  an  enormous  disadvantage  in 
competing  with  them  for  the  patronage  of  the  public." 
The  fifth  and  last  question  was :  "Whether  it  is  ex- 
pedient to  grant  the  Corporation  a  license  to  establish 

Commissioner  ^"^  ^^^^^  °"  ^  Telephone  Exchange  of 
disbelieves  in  its  Own,  either  immediately  or  in  the 
Competition  ^^^^^^^  y,     Upon  this  point  the  Commis- 

sioner reported  :"....  The  Corporation  of  Glasgow  pro- 
pose to  establish  a  Telephone  service ....  and  they  have 
induced  the  Municipal  Authorities  of  the  Burghs  of 
Rutherglen,  Partick.  Kinning  Park,  Pollokshaws,  Go- 
van,  Kirkintilloch  and  Clyde  Bank,  to  concur  with  them 
in  their  proposed  undertaking,  by  promising  the  in- 
habitants of  these  Burghs  a  metallic  circuit  Telephone 
system  at  a  $26.25  ^^^e.  irrespective  of  distance  from 
Glasgow.  PTere  T  think  the  position  of  the  National 
Telephone  Company  is  entitled  to  consideration.  The 
Corporation  put  forward  their  proposal  as  leading  to 
the  establishment  of  a  competing  service  with  that 
presently  afforded  by  the  National  Telephone  Company. 


166         TPIE   TELEPHONE   IN   GREAT    BRITAIN 

But  it  is  evident  what  the  Corporation  wish  and  ex- 
pect to  do  is  to  extinguish  the  National  Telephone  Com- 
pany altogether  so  far  as  the  Glasgow  district  is  con- 
cerned. It  is  idle  to  speak  of  competition  when  they 
propose  to  supply  a  metallic  circuit  underground  sys- 
tem, and  at  the  same  time  to  prevent  the  National  Tele- 
phone Company  (who  wish  to  do  so)  from  supplying 
the  same.  It  appears  to  n!e  that  this  can  have  only 
one  result,  and  it  will  be  for  the  Postmaster  General 
to  consider  whether  it  would,  in  these  circumstances, 
be  fair  to  the  Company,  who  have  been  licensees  of  the 
Post  Office  for  many  years,  and  have  laid  out  large 
sums  in  supplying  Glasgow  with  a  telephone  service, 
to  give  a  license  to  another  body,  who  propose  to  com- 
pete with  the  present  licensee  on  unequal  terms.^  The 
result  of  such  a  competition  would  ultimately  be  not  to 
keep  up  two  competing  services,  but  to  substitute  one 
monopoly  for  another. 

"If,  on  the  other  hand,  the  Corporation,  as  a  condi- 
tion of  obtaining  a  license,  were  by  any  chance  to  allow 
the  National  Telephone  Company  to  lay  an  under- 
ground metallic  circuit,  or  if  that  Company  were  to 
obtain  Parliamentary  powers  to  do  so,  the  result  would 
be  that  the  citizens  of  Glasgow  would  be  annoyed  by 
having  the  streets  lifted  twice  instead  of  once, ....  and 
the  Government,  if  they  resolved  at  the  end  of  19 ii  to 


^  Ultimately  the  City  of  Glasgow  established  a  municipal  tele- 
phone plant,  put  its  own  wires  underground,  and  refused  to  permit 
the  National  Telephone  Company  to  put  its  wires  underground. 


THE  GLASGOW  EPISODE  167 

take  over  the  Telephone  Systems  in  Glasgow,  would 
have  more  to  pay  than  if  only  one  systein  existed.  In 
the  meantime  there  would  be  two  competing  systems, 
and  most  persons  with  large  businesses  would  require 
to  be  on  both  systems,  so  that  no  saving  would  be 
effected,  even  if  both  systems  were  worked  at  a  $25 
rate  of  user.  On  the  whole,  I  think  it  would  require 
much  stronger  reasons  than  at  present  exist  to  warrant 
the  laying  down  of  two  competing  underground  metal- 
lic circuit  telephone  systems  in  the  Glasgow  District, 
and  the  infliction  on  the  community  of  the  certain  in- 
convenience that  two  systems  involve 

"In  these  circumstances,  and  apart  from  the  diffi- 
culty of  the  situation,  which  I  shall  hereafter  advert  to, 
I  should  have  been  prepared  to  state  as  my  opinion  that 
it  is  not  expedient  that  the  Corporation  of  Glasgow 
should  obtain  a  license  to  carry  on  the  business  of  tele- 
phony within  the  present  Glasgow  District  area,  and 
that  for  these  reasons : ....  On  general  grounds  of 
public  convenience  it  is  inexpedient  to  have  two  tele- 
phone systems  or  two  telephonic  authorities  within  the 
same  area,  as  this  leads  to  the  necessity  of  members 
of  the  public  subscribing  to  both  systems,  or  suffering 
from  delay  in  the  transshipment  of  messages  from  one 
system  to  the  other.  Because  the  establishment  of  a 
second  telephone  system  may  render  the  acquisition  of 
the  telephones  in  Glasgow  by  the  Government  at  the 
end  of  191 1  more  difficult  and  more  expensive.  Be- 
cause up  to  this  time  the  Corporation  have  not  pro- 


168         THE    TELEPHONE    IN   GREAT    BRITAIN 

duced  satisfactory  evidence  that  they  could  successfully 
finance  and  work  the  proposed  system  without  the  risk 
of  putting  a  new  and  serious  burden  on  the  ratepayers 
of  Glasgow. 

"In  my  opinion,  the  reasonable  solution  of  the  matter 
would  be  that  the  Corporation  should  grant  the  Na- 
tional Telephone  Company  the  same  facilities. ..  .as 
The  Reasonable  the  large  English  Municipalities  have 
Solution  already  done,  and  under  similar  safe- 

guards. But  the  Corporation  of  Glasgow  at  present 
state  that  they  will  never  consent  to  the  National  Tele- 
phone Company  being  allowed  to  lay  an  underground 
system  in  Glasgow,  and  it  is  clear  that  unless  this  is 
done  the  telephone  service  in  Glasgow  will  continue  to 
be  inefficient,  which  is  a  state  of  matters  that  ought  not 
to  be  allowed  to  continue.  The  question  therefore 
arises  whether,  accepting  the  present  situation,  it  would 
not  be  expedient,  notwithstanding  all  the  objections  I 
have  pointed  out,  that  the  license  they  now  ask  should 
be  granted  to  the  Corporation,  throwing  on  them  the 
whole  responsibility  of  their  proposed  undertaking. 

"One  way  out  of  the  difficulty  would  be  for  the  Post 
Office  to  establish  a  Telephone  Exchange  in  Glasgow 
themselves,  with  an  underground  metallic  circuit  sys- 
tem of  wires.  To  do  so  would  seem  to  be  authorized 
by  clause  i8  of  the  agreement  between  the  Postmaster 
General  and  the  National  Telephone  Company,  dated 
March  25,  1896. 

"If  this  course  does  not  recommend  itself  to  Her 


THE  GLASGOW  EPISODE  \('>9 

Majesty's  Government,  then  in  the  interests  of  the  pnl)- 
The  Actual  ^^c  who  use  the  telephone  in  Glasgow 

SotiHion  and   district,   I  am  of  opinion  that  it 

would  be  expedient  to  grant  to  the  Glasgow  Corpora- 
tion the  license  they  have  now  requested,  provided 
that  they  are  able  to  satisfy  the  Postmaster  General  that 
financially  their  scheme  is  sound,  and  that  they  have 
the  means  of  carrying  it  out."^ 

The  verdict  of  the  Commissioner,  a  man  trained  to 
sift  and  w^eigli  evidence,  was  overwhelmingly  in  favor 
The  Manufacture  of  the  National  Telephone  Company. 
of  Public  Opinion  Nevertheless  the  Glasgow  episode  seri- 
ously damaged  the  reputation  of  the  Company,  not 
only  with  the  public  at  large,  but  also  with  numerous 
Members  of  the  House  of  Commons.  The  public  at 
large  practically  does  not  read  Blue  Books  at  all ;  and 
many  Members  of  the  House  of  Commons  shirk  that 
duty  as  much  as  possible.  The  men  in  public  life  in 
the  United  Kingdom  not  infrequently  rely  upon  those 
facts  for  security  in  making  statements  that  they  could 
not  justify.  Thus  the  Lord  Provost  of  Glasgow,  Mr. 
S.  Chisholm,  before  a  Select  Committee  of  1900,  made 
the  following  statement :  "We  did  everything  w^e  could 
to  come  to  terms  with  them  [the  National  Telephone 
Company].  We  asked  them  to  endeavor  to  give  us  a 
better  and  more  efificient  service,  and  they  said  they 
could  not  do  it  unless  at  greatly  increased  price,  be- 

^Glasgow  Telephone  Inquiry,   1897. 


170         THE   TELEPHONE   TN   GREAT   BRITAIN 

cause  it  would  require  a  large  outlay  of  capital,  which 
must  be  returned  to  them,  and  they  could  hold  out  no 
prospect  of  a  reduction  of  the  price,  but  rather  an  in- 
crease, if  this  service  were  to  be  more  efficient."^  In 
October,  1897,  Mr.  Chisholm,  Senior  Magistrate  of 
the  City  and  a  Member  of  the  Telephone  Committee, 
had  appeared  before  Mr.  Jameson,  Commissioner, 
and  had  been  asked :  "They  [the  National  Telephone 
Company]  were  not  proposing  to  raise  the  [subscrip- 
tion] rates?"  He  had  answered  :  "They  were  not  say- 
ing [i.  c,  proposing]  that."  At  the  same  time,  Mr. 
E.  T.  Salvesen,  Counsel  for  the  Corporation  of  Glas- 
gow, in  the  cross-examination  of  his  witnesses,  as  well 
as  in  the  argument  before  the  Commissioner,  always 
proceeded  on  the  assumption  that  the  National  Tele- 
phone Company  had  declined  to  promise  to  reduce  its 
tariff,  and  never  on  the  assumption  that  it  had  inti- 
mated that  it  might  raise  it.^  Again,  in  1893,  Mr.  S. 
Chisholm  had  been  a  member  of  the  Glasgow  Special 
Committee  on  Telephone  Service,  which  had  drawn 
up  a  Memorandum  containing  the  following  statement : 
"Tn  order  to  give  a  cheap  and  efficient  service  two  con- 
ditions must  be  fulfilled — first,  a  complete  twin-wire 
system,  combined  with  the  most  modern  appliances, 
must  be  provided, ....  Moreover,  no  adequate  double- 
wire  service  can  be  established  without  going  under- 

^  Report  from  the  Joint  Select  Committee  on  Mtmicipal  Trading, 
1900;    q.  2865  et  passim. 

^Glasgow  Telephone  Inquiry,  1897;  q.  4272,*  Mr.  S.  Chisholm; 
and  q.  4374,  and  p.  226,  Mr.  E.  T.  Salvesen. 


THE  GLASGOW  EPISODE  171 

ground.  The  National  Telephone  Company  is  striv- 
ing  to  obtain  powers  to  do  so,  but  it  may  be  assumed 
that  the  Corporation  will  never  consent  to  any  Com- 
pany having  the  right  to  open  up  the  streets  and  lay 
conduits."^  The  memorandum  had  made  no  mention 
of  any  proposal  of  the  National  Telephone  Company 
to  raise  its  tariff.  At  that  time  the  Company  had  the 
underground  metallic  circuit  system  in  Newcastle  and 
Hull,  and  was  introducing  the  overhead  metallic  cir- 
cuit in  Metropolitan  London.  In  all  three  cases  the 
Company  was  charging  its  normal  tariff.^  Finally  in 
1900,  when  Mr.  Chisholm,  Lord  Provost  of  Glasgow, 
made  the  statement  under  discussion,  the  Company  had 
established  the  metallic  circuit  underground  service  in 
a  large  number  of  cities,  and  in  no  case  had  it  raised 
its  tariff. 

In  March.  1898,  Mr.  J.  S.  Forbes,  Chairman  Na- 
tional Telephone  Company,  wrote :  "The  Glasgow  in- 
quiry lasted  eleven  days.  The  cost  to  the  company 
was  over  $22,500,  to  the  corporation 
nqutry  ^^^^  $15,000,  and  to  a  combination  of 
traders  and  would-be  promoters  of  a  competing  system 
nobody  knows  how  much,  but  as  they  occupied  a  large 
portion  of  the  time  it  must  have  been  very  consider- 
able."-^ 

^Glasgow  Telephone  Inquiry,  1897;  p.  295:  Memorandum  for 
the  Telephone  Committee.  May   10,    1893. 

^Report  from  the  Joint  Committee  on  Electric  Poivers  (Protec- 
tive Clauses),  1893:  q.  208  to  215,  Mr.  W.  E.  L.  Gaine,  General 
Manager  National  Telephone  Company. 

^Report  from  the  Select  Committee  on   Telephones.  1898;  p.  515- 


172        THE   TELEPHONE   IN   GREAT   BRITAIN 

111  1896,  or  thereabout,  under  the  Agreement  made 
with  the  National  Telephone  Company  upon  the  occa- 
sion of  the  so-called  purchase  of  the 

Glasgow  ob- 
structs Post-         trunk  line  wires,  the  Postmaster  Gen- 

mastcr  General  ^^^i  applied  to  the  Corporation  of  Glas^ 
gow  for  permission  to  open  the  streets  for  the  purpose 
of  laying  underground  wires  between  the  several  ex- 
changes of  the  Company,  as  well  as  between  the  ex- 
changes of  the  Company  and  the  Post  Office  Trunk 
Line  Exchange.  vSuch  underground  wires  were  essen- 
tial for  the  attainment  of  the  maximum  distinctness 
of  speech  over  the  Post  Office  trunk  lines.  The  Cor- 
poration replied  that  it  would  give  its  consent  only  on 
the  understanding  that  the  wires  in  question  were  not 
to  be  devoted  to  the  purposes  of  the  National  Tele- 
phone Company.  The  Postmaster  General  carried  the 
case  to  the  Railway  and  Canal  Commissioners,  who 
held  that  the  Corporation  had  no  right  to  make  its  con- 
sent conditional  upon  the  National  Telephone  Company 
not  using  the  underground  wires.^  Lord  Stourn- 
mouth-Darling,  the  Scottish  Member  of  the  Commis- 
sion, presided. 

Before  the  controversy  had  been  ended  by  the  Rail- 
way and  Canal  Commissioners,  the  Corporation  had 
denied  the  Post  Office  permission  to  open  the  streets 
for  the  purpose  of  repairing  its  telegraph  wires  and 
laying  additional  telegraph  wires  in  its  pipes.  At  one 
time  it  had  almost  threatened  violence  to  the  Post  Office 

^The  Electrician:  July   14  and  21,   iSgg. 


THE  GLASGOW  EPISODE  17;^ 

workmen  engaged  upon  the  work  in  question.  The 
quarrel  delayed  for  several  years  the  completion  of 
several  Post  Office  trunk  line  circuits.^ 

Edinburgh  adopted  the  same  policy  of  obstruction 
toward  the  Postmaster  General.  It  instructed  the 
Edi  b     h  Town  Clerk  to  write  as  follows  to  the 

obstructs  Post-      Postmaster    General.      "As    you    are 

master   General      ^^,^^^     j^    j^^^    ^een    the    policy   of    this 

corporation  cordially  to  give  the  Post  Office  facilities 
for  their  telegraph  wires,  but  the  situation  and  termini 
of  the  routes  indicated  on  the  map  suggest  that  the 
wires  may  be  intended  for  the  use  of  the  Telephone 
Company  as  part  of  their  undertaking,  which  is  a  pure- 
ly commercial  concern.  The  Corporation  object  to  give 
any  rights  in  their  streets  to  private  or  commercial  un- 
dertakings, whether  applied  for  directly  or  through  the 

medium  of  the  Post  Office Kindly  state  whether 

the  wires  would  be  exclusively  the  property  of  the 
Government  and  either  used  by  themselves  or  available 
to  the  public."^ 

The  length  to  which  the  people  of  Edinburgh  were 

willing  to  go  in  the  gratification  of  their  dislike  of  the 

National  Telephone  Company,  is  indi- 

The  Public  ^^^^^  jj^  ^|^g   Statement  made  in  July, 

Convenience 

1899,  by  Mr.  F.  Begg,  M.  P.,  that  un- 
til quite  recently  he  had  held  in  his  possession  a  letter 

^Report  from  the  Select  Committee  on  Tclepliones,  1898;  q.  6947, 

6948  and  6988  to  700.^.  Sir  Robert  Hunter.  Solicitor  to  Post  Office. 

^Report  from  the  Select  Comxiittee  on  Telephones,  1898;  p.  517. 


174         THE   TELEPHONE   IN   GREAT   BRITAIN 

in  which  the  Town  Clerk  of  Edinburgh  refused  to  per- 
mit the  fire  brigade  to  be  joined  on  to  the  telephone, 
even  though  the  National  Telephone  Company  offered 
free  service.^ 

The  story  of  Glasgow's  policy  toward  the  National 
Telephone  is  so  incredible  that  he  who  undertakes  to 
tell  that  story  must  deem  it  fortunate 
'  """"^''3'  ^|^^|.  |-,g  f.g^^  confine  himself  to  quoting 

from  a  public  document  written  by  the  present  Senator 
of  the  College  of  Justice  in  Scotland.  And  yet,  in- 
credible as  that  story  is,  it  has  its  parallel  in  Glasgow's 
recent  electric  light  and  street  railway  policies.^  In 
1890,  the  Corporation  excluded  private  enterprise  from 
supplying  the  electric  light  in  Glasgow,  and  for  a  num- 
ber of  years  thereafter  it  "smothered"  its  municipal 
electric  light  plant  for  the  purpose  of  protecting  its 
municipal  gas  plant.  Again,  in  1893,  the  Corporation 
assumed  the  operation  of  the  street  railways  which  it 
had  owned  since  1870,  or  thereabout.  Not  until  Janu- 
ary, 1899,  did  the  Corporation  resolve  to  convert  its 
horse  street  railways  to  electric  street  railways.  To 
this  day  the  Corporation  has  failed  to  supply  Glasgow 
with  a  street  railway  system  that  would  relieve  the 
horrible  congestion  that  has  resulted  from  the  past  lack 
of  transportation  facilities.  As  late  as  1901,  there 
were  in  Glasgow  some  91,000  "overcrowded"  persons 
living  in  the  condition  of  3  to  12  persons  in  one  room, 

^Hansard's  Parliamentary  Debates;  July   25.   1899. 
'H.  R.  Meyer:  Municipal  Ozvnership  in  Great  Britain, 


THE  GLASGOW  EPISODE  175 

and  some  194,000  "overcrowded"  persons  living  in  the 
condition  of  5  to  12  persons  in  two  rooms.  Not  only 
has  the  Corporation  of  Glasgow  failed  itself  to  provide 
adequate  street  railway  facilities;  it  also  has  uniformly 
refused  to  permit  either  the  Board  of  Trade  or  the 
Light  Railway  Commissioners  to  grant  charters  to 
private  companies  that  stood  ready  to  supplement  Glas- 
gow's inadequate  street  railway  service. 

In  closing,  attention  should  be  drawn  once  more  to 
Mr.  Commissioner  Jameson's  comments  upon  the  na- 
ture of  the  public's  property  in  the  streets.  They  were 
that  the  streets  were  vested  in  the  municipalities  by 
Act  of  Parliament  only  for  certain  public  purposes,  the 
main  one  being  the  use  of  the  surface  for  public  traffic, 
and  the  subsidiary  purposes  being  such  as  the  construc- 
tion of  sewers  and  the  laying  of  gas  and  water  pipes. 
The  implication  of  Mr.  Commissioner  Jameson's  com- 
ments, as  well  as  of  Mr.  Justice  Wright's  comments — 
quoted  in  the  preceding  chapter — was  that  the  streets 
had  not  been  vested  in  the  municipalities  in  order  that 
those  bodies  should  be  in  a  position  to  enforce  political 
theories  as  to  whether  "dividend  seeking"  companies 
should  be  allowed  to  use  the  streets  at  all,  or,  on  what 
terms  they  should  be  allowed  to  use  them. 

It  would  conduce  greatly  to  clear  thinking  upon  the 
question  of  the  special  taxation  of  municipal  public 
service  corporations,  as  w'ell  as  upon  the  question  of 
the  regulation  "on  principle"  of  the  profits  to  be  made 
by  such  corporations,  if  the  public  could  be  made  to  re- 


176         THE    TELEPHONE    IN    GREAT    BRITAIN 

member  that  those  questions  have  nothing  to  do  with 
the  fact  that  the  municipal  pubHc  service  corporations 
use  the  streets.  The  pubHc  authority  has  the  power 
to  regulate  the  profits  made  in  any  industry,  as  well  as 
the  power  to  prescribe  the  price  at  which  any  service 
shall  be  rendered,  or  any  commodity  shall  be  sold. 
Whether,  in  any  particular  instance,  public  necessity 
and  convenience  re(|uire  the  exercise  of  that  power,  is 
a  question  of  fact  dependent  upon  the  circumstances  of 
the  case.  To  assert,  without  inquiry  into  the  circum- 
stances of  each  individual  case,  but  simply  as  a  matter 
of  general  principle,  that  profits  should  be  limited  and 
charges  should  be  regidated  in  ^  those  industries  which 
must  obtain  a  franchise  to  use  the  streets,  is  to  advo- 
cate unequal  taxation  and  class  legislation.  Practi- 
cally all  statesmen  assent  to  the  abstract  proposition  that 
unequal  taxation  and  class  legislation  are  vicious;  but 
in  practice  many  of  them  forget  that  proposition.  The 
experience  of  England  and  Scotland  under  departure 
from  that  proposition  in  the  case  of  the  so-called  muni- 
cipal public  service  corporations,  establishes  once  more 
the  profound  wisdom  of  the  master  mind  that  in  the 
Wealth  of  Nations  established  the  viciousness  of  un- 
equal taxation  and  class  legislation. 


CHAPTER  XII 

MR.  R.  W.  HANBURY,  FINANCIAL  SECRETARY  TO 
THE  TREASURY,  AND  REPRESENTATIVE,  IN  THE 
HOUSE  OF  COMMONS,  OF  THE  POSTMASTER 
GENERAL,  THE  DUKE  OF  NORFOLK,  ATTACKS 
THE   NATIONAL   TELEPHONE  COMPANY 

Mr.  James  Caldwell,  M.  P.  for  Lanark,  makes  a  Motion 
asking  the  Government  to  abandon  its  past  policy  of  refusing  to 
grant  telephone  licenses  to  local  authorities.  The  Motion  is 
seconded  by  Mr.  G.  Boscawen,  M.  P.  for  Kent,  Tunbridge,  and 
Private  Secretary  to  the  Chancellor  of  the  Exchequer,  Sir 
Michael  Hicks-Beach.  Mr.  R.  W.  Hanbury  replies  on  behalf  of 
the  Government,  offering  to  refer  to  a  Select  Committee  the 
question  of  municipal  telephone  licenses.  He  prefers  a  series 
of  charges  which  prove  most  damaging  to  the  National  Tele- 
phone Company,  though  they  would  not  have  passed  muster 
with  a  well  informed  body  of  listeners  or  readers.  Why  Par- 
liament and  the  public  were  not   well  informed. 

At  the  close  of  the  year  1897,  there  had  been  prac- 
tically no  demand  from  Local  Authorities  for  telephone 
licenses.^  But  when  the  year  1897  had  closed,  and  the 
Post  Office  had  not  availed  itself  of  its  power  to  buy 

^Report  from  the  Select  Committee  on  Telephones,  i8g8;  p.  520, 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office.  Applications 
from  Local  Authorities  for  Telephone  licenses :  Glasgow,  in  August, 
1893;  Ealing,  in  December,  1893;  Dover,  in  February,  i8g6;  the 
States  of  Guernsey,  in  June,  1896  ;  and  Huddersfield,  in  December, 
1895.  Resolutions  forwarded  from  Local  Authorities  to  the  Post- 
master General,  in  favor  of  granting  telephone  licenses  to  Local 
Authorities:  Burnley,  in  December,  1897;  twenty-four  other  Local 
Authorities  in  January  to  May,  1898. 
12  177 


178        THE    TELEPHONE    IN   GREAT    BRITAIN 

out  the  National  Telephone  Company,  on  arbitration 
terms,  a  number  of  Local  Authorities  began  to  demand 
that  the  Post  Office  abandon  its  past  policy  of  refusing 
to  give  a  license  to  a  Local  Authority  unless  it  should 
prove  possible  to  show  that  the  National  Telephone 
Company  was  failing  in  its  duties  in  the  area  of  the 
Local  Authority  concerned. 

On  April  i,  1898,  Mr.  James  Caldwell,  M.  P.  for 
Lanark,  moved:  "That  the  continued  refusal  of  the 
Post  Office  to  grant  licenses  to  and  allow  municipal 
corporations  and  other  responsible  bodies  to  compete 
with  the  National  Telephone  Company  is  contrary  to 
the  Treasury  Minute  of  23rd  May,  1892,  is  inconsis- 
tent with  the  letter  and  spirit  of  the  agreement  entered 
into  with  the  telephone  companies  when  the  Post  Office 
took  over  the  trunk  lines ;  and  is  calculated  to  prevent 
the  establishment  of  a  cheap,  adequate  and  efficient 
telephone  service  in  the  United  Kingdom,  and  to  in- 
crease the  difficulties  and  costliness  of  any  arrangements 
for  the  assumption  by  the  State  of  the  whole  telephone 
systems  should  that  step  ultimately  be  considered  de- 
sirable."^ The  Motion  was  seconded  by  Mr.  G. 
Boscawen,  M.  P.  for  Kent,  Tunbridge,  and  Private 
Secretary  to  the  Chancellor  of  the  Exchequer,  Sir 
Michael  Hicks-Beach. 

Mr.  R.  W.  Hanbury,  Financial  Secretary  to  the 
Treasury,  and  Representative  in  the  House  of  Com- 
mons of  the  Postmaster  General,  the  Duke  of  Norfolk, 

^Hansard's  Parliamentary  Debates;  April  i,   1898,  p.  1671. 


MR.   HANBURY'S  CHARGES  179 

replied  on  behalf  of  the  Government.  Whatever  may 
have  been  the  purpose  of  Mr.  Hanbury,  the  effect  of 
his  reply  was  to  strengthen  and  augment  the  popular 
misconceptions  concerning  the  National  Telephone 
Company  created  by  the  facts  and  events  descril^ed  in 
the  preceding  chapters.  Mr.  Hanbury  opened  his 
speech  with  the  statement  that  the  National  Telephone 
Company's  tariff  must  depend  upon  the  Company's 
capitalization,  which,  he  alleged,  was  altogether  ex- 
cessive. He  said :  "Without  entering  into  minute 
The  Charge  of  calculations  as  to  the  actual  value  of  the 
"Watered"  Capital  plant  of  this  Company,  I  am  able  to  say 
that,  while  I  believe  its  capital  stands  at  the  present 
moment  at  a  value  of  something  like  $30,000,000,  the 
Post  Office  calculation  is  that  that  could  entirely  be 
replaced  with  a  metallic  circuit  in  every  exchange  for 
a  very  little  over  $12,500,000  of  capital." 

At  the  close  of  June,  1898,  three  months  after  Mr. 
Hanbury  had  made  the  foregoing  statement,  the  Na- 
tional Telephone  Company  had  in  operation  96,300^ 
subscribers'  lines,  which,  according  to  the  testimony  of 
Mr.  W.  E.  L.  Gaine,  General  Manager,  had  cost  on  the 
average  $200  per  line."  Mr.  Hanbury 's  statement 
meant  that  those  lines  could  be  replaced  at  an  average 
expenditure  of  $130  per  subscriber's  line.    On  the  other 

'Exclusive  of  16,500  so-called  private  lines,  which  did  not  come 
within  the  Postmaster  General's  monopoly,  and  would  not  neces- 
sarily be  purchased  in  the  event  of  the  Post  Office  buying  the 
Company's  plant. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7546 
to  7556. 


180        THE    TELEPHONE   IN   GREAT    BRITAIN 

hand,  in  June,  1898,  Mr.  J.  C.  Lamb,  Second  Secretary 
to  the  Post  Office,  stated  that  the  Post  Office's  capital 
expenditure  upon  telephone  exchanges  averaged  $175 
to  $200  per  subscriber's  line/  in  the  provinces,  where 
the  cost  of  installing  telephone  exchanges  was  very 
much  less  than  in  Metropolitan  London.^  Again,  in 
March,  1906,  it  had  cost  the  Post  Office  on  the  average 
fully  $175  per  subscriber's  line  to  erect — mostly  in 
small  rural  places,  where  the  cost  of  installation  is  com- 
paratively low — some  340  telephone  exchanges  with 
8,425  subscribers.^ 

In  March,  1899,  Mr.  Hanbury  stated  in  the  House 
of  Commons*  that  he  had  been  "considerably  abused" 
for  having  said  that  the  Post  Office  might  replace  the 
whole  of  the  National  Telephone  Company's  plant  at 
an  outlay  of  $12,500,000.  He  sought  to  justify  him- 
self by  saying  that  Mr.  Gaine,  General  Manager  Na- 
tional Telephone  Company,  had  testified  before  the 
Select  Committee  of  1898  that  the  Company's  96,000 
wires  had  cost  on  an  average  $200  a  piece,  making  a 
total  of  $19,000,000.  Subtracting  from  that  sum,  the 
"water"  in  the  capitalization,  or  $6,250,000,  one  ob- 

'  At  this  time  the  Post  Office  was  operating  about  forty  small 
telephone  exchanges,  of  which  twenty-four  had  less  than  ten  sub- 
scribers each  ;  eight  had  from  ten  to  nineteen  subscribers  each ; 
two  had  respectively  twenty  and  twenty-three  subscribers  ;  two  had 
respectively  thirty-two  and  thirty-five  subscribers ;  and  four  had 
respectively  forty-nine,  sixty,  one  hundred  and  sixty-two  and  five 
hundred  and  sixty-five  subscribers.  Parliamentary  Paper,  No.  201, 
1899. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  p.  559. 

*  Fifty-second  Report  of  the  Postmaster  General  on  the  Post 
OfUce.  1906. 

*  Hansard's  Parliamentary  Debates;  March   6,   1899,  p.   1386. 


MR.   HANBURY'S   CHARGES  181 

tained  the  figure  of  $12,750,000,  which  justified  his 
statement  of  April  i,  1898.  Mr.  Hanbury,  as  Chair- 
man of  the  Select  Committee,  himself  had  examined 
Mr.  Gaine  on  the  foregoing  point,  and  he  had  been  told 
by  Mr.  Gaine  that  the  actual  cost  of  subscribers'  wires 
— "without  what  is  called  'water'  " — had  averaged  $200 
per  wire.  And  Mr.  J.  S.  Forbes,  Chairman  National 
Telephone  Company,  had  testified  in  reply  to  questions 
put  by  Mr.  Hanbury,  Chairman  of  the  Committee,  that 
the  Company's  cash  outlay  upon  52,733  subscribers' 
wires  erected  between  April,  1892,  and  January,  1898, 
had  been  $10,136,000,  or  $192  per  wire.^ 

The  second  point  which  Mr.  Hanbury  made  against 
the  National  Telephone  Company,  in  the  debate  of 
April  I,  1898,  was  that  it  had  "taken  advantage"  of 
the  past  absence  of  competition,  and  had  given,  in  some 
instances,  an  inefficient  service.  He  said :  "At  the  same 
time  we  have  to  recognize  the  fact  that  in  several  large 
and  important  towns  in  this  country,  even  in  the  Me- 
tropolis itself,  and  in  Glasgow  and  other  Scotch  towns, 
there  have  been  complaints  made  of  inefficient  service. 
The  Charge  of  ^^  the  case  of  Glasgow  that  complaint 
I neMcient  Service  has  been  proved  to  be  true  by  our  own 
Commissioner,  (Mr.  Andrew  Jameson,  Q.  C.)  and  in 
London  Mr.  Forbes  admitted  very  grave  defects  in  the 
service."  The  statements  in  the  last  sentence  were  so 
incomplete  as  to  be  misleading.     The  Commissioner's 

^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  7546 
to  7553,  Mr.  Hanbury,  Chairman,  examining  Mr.  W.  E.  L.  Gaine  ; 
and  q.  6060  to  6062,  Mr.  Hanbury,  examining  Mr.  J.  S.  Forbes. 


182         THE    TELEPHONE    IN    GREAT    BRITAIN 

verdict  had  been  that  the  continued  inefficiency  of  the 
telephone  service  in  Glasgow,  for  the  most  part,  had 
been  due  to  the  refusal  of  the  Corporation  of  Glasgow 
to  allow  the  National  Telephone  Company  to  construct 
a  metallic  circuit  underground  system  underneath  the 
streets,  and  that  such  refusal  was  not  reasonable  or 
justifiable,  on  grounds  of  public  policy  or  other  grounds. 
Mr.  Forbes'  admission  of  very  grave  defects  in  the 
Metropolitan  London  service  had  been  accompanied 
by  the  statement  that  the  Company  could  not  remedy 
the  defects  unless  it  be  given  permission  to  construct 
an  underground  metallic  circuit  system.  And  on  April 
2,  1897,  before  the  question  of  municipal  telephone 
licenses  had  become  a  political  issue,  Mr.  Hanbury 
himself  had  said  in  the  House  of  Commons :  "At  pres- 
ent any  complaints  of  the  telephone  service  arose  from 
the  difficulty  the  Company  had  in  procuring  way- 
leaves."^  He  had  added  :  "No  considerable  complaint 
had  been  made  of  [the  Company's  tariffs  in  Metro- 
politan London]  and  he  did  not  think  they  could  be 
said  to  be  excessive."  Again,  In  March,  1899,  Mr. 
Hanbury  used  these  words :  "Now,  on  the  question  of 
efficiency — on  what  after  all  does  the  efficiency  of  a 
service  like  this  mainly  depend?  It  mainly  depends, 
of  course,  on  way-leaves,  and  way-leaves  undoubtedly 
this  Company  has  not  got,  and  will  not  be  able  to  get  in 
the  future  to  the  extent  it  wishes.  And  why  has  it  not 
got  them  ?    It  has  applied  to  Parliament  time  after  time, 

^Hansard's  Parliamentary  Debates;  April  2,   1897,  p.  465. 


MR.   HANBURY'S  CHARGES  183 

but  Parliament  is  not  going  to  override  the  local  au- 
thorities, to  impose  everywhere  and  in  every  locality 
in  the  country  a  company  on  these  local  authorities 
without  their  permission.  And  so  backed  up  by  Par- 
liament, the  Municipalities  are  refusing  to  grant  these 
way-leaves,  and  if  they  are  not  granted,  you  cannot 
have  an  efficient  service."^ 

Returning  to  the  debate  of  April  i,  1898,  one  finds 
Mr.  Hanbury  arguing  in  favor  of  the  establishment 
of  competition  with  the  National  Telephone  Company, 
such  competition  to  come  from  the  Municipalities.  He 
says :  "They  have  the  way-leaves,  and  they  w^ould  be 
able,  therefore,  to  lay  a  most  efficient  underground 
service,  and  I  confess  there  is  a  great  deal  to  be  said  on 
behalf  of  the  Municipalities,  who  say  that  while  they 
are  perfectly  willing  to  allow  the  streets 
Sympathizes  with  ^  be  taken  up  for  their  own  exchanges. 
Municipalities'       they  do  not  wish  them  to  be  at  the 

Refusal  of  mercy  of  anybody  who  chooses  to  come 

Way-leaves  j  j        j 

there,  and  I  think  there  is  a  great  deal 

of  justice  in  that  contention  of  the  Municipalities." 

This  statement  should  be  judged  in  the  light  of 
the  following  facts :  In  1895,  Mr.  John  Harrison,  Town 
Clerk  of  Leeds,  as  Representative  of  the  Association 
of  Municipal  Corporations,  had  stated  before  a  Parlia- 
mentary Select  Committee  that  the  Association  did  not 
demand  the  power  to  veto  the  National  Telephone 
Company's  applications  to  open  the  streets,  in  order 

'^Hansard's  Parliamentary  Debates;  March  6,  1899;  p.  1382, 


18-1        THE    TELEPHONE    IN   GREAT   BRITAIN 

that  the  Municipalities  might  be  able  to  regulate  the 
time  and  manner  of  opening  the  streets,  but  in  order 
that  they  might  be  able  to  impose  payments  for  way- 
leaves,  as  well  as  prescribe  tlie  tariffs  to  be  charged  by 
the  Company.^  In  the  case  of  the  Postmaster  General 
versus  the  City  of  London,  Mr.  Justice  Wright,  deliver- 
ing the  opinion  of  the  Railway  and  Canal  Commis- 
sioners, said  :  "I  think,  first,  that  the  objection  which  is 
made  is  not  of  a  class  which  it  was  intended  these  street 
authorities  should  be  enabled  to  raise.  I  think  the  objec- 
tions which  they  are  entitled  to  raise  must  be  objections 
of  a  kind  which  concern  them  as  a  road  authority,"  that 
is,  as  guardians  of  the  comfort,  convenience  and  safety 
of  the  public  as  users  of  the  streets.  In  the  Glasgow  In- 
quiry, Mr.  Sheriff  Jameson  denominated  "self-con- 
demned" the  stock  arguments  by  which  the  Municipali- 
ties have  sought  to  justify  their  refusal  of  way-leaves 
to  the  National  Telephone  Company. 

Mr.  Hanbury  next  proceeded  to  discuss  the  difficulty 
in  the  way  of  establishing  municipal  telephone  systems 
arising  out  of  the  fact  that  the  telephone  areas  assigned 
to  the  National  Telephone  Company  under  the  Agree- 
ment of  1892  were  so  large  as  to  embrace  in  almost  all 
Mr.  H anbury's  i" stances  more  than  one  local  authority 
Insinuations  as  or  municipality.  The  fact  would  make 
to  Large  Areas  j^  necessary  for  one  local  authority  to 
obtain  power  to  construct  telephone  plants  in  adjoining 

^Report  from  the  Select  Committee  on  the  Telephone  Service, 
189s;  q.  1496  to   1509,   1572  and   1579. 


MR.    HANBURY'S   CHARGES  185 

local  authorities'  areas,  or  for  a  number  of  adjoining 
authorities  to  cooperate  in  the  construction  of  a  so- 
called  "metropolitan"  system.  On  the  other  hand,  local 
and  parochial  jealousies  made  either  of  those  forms  of 
cooperation  extremely  difficult,  and  threatened  to  de- 
feat the  achievement  of  the  "municipalization"  of  the 
telephone  even  if  the  Post  Office  should  abandon  its  past 
policy  of  refusing  to  grant  municipal  telephone  licenses 
in  the  absence  of  proof  that  the  local  system  of  the  Na- 
tional Telephone  Company  was  inefficient.  The  advo- 
cates of  the  policy  of  Municipal  Telephones  had  per- 
ceived that  obstacle,  and  had  spread  the  inaccurate  and 
foundationless  charge  that  the  National  Telephone 
Company  had  succeeded  in  "hoodwinking"  the  Post 
Office  into  making  the  Company's  telephone  areas  so 
large  that  it  would  be  extremely  difficult  to  establish 
municipal  telephone  systems. 

Under  the  foregoing  conditions,  Mr.  Hanbury  used 
the  following  words  in  discussing  the  telephone  areas 
of  the  Company.  "I  am  afraid  that  by  some  means  or 
other  certain  areas  have  already  been  assigned  to  the 
National  Telephone  which  even  the  larger  municipali- 
ties could  not  possibly  embrace  within  their  boundaries. 
The  area  of  the  [National  Telephone  Company's]  ex- 
change of  London  alone,  I  am  told,  is  750*  square 
miles,  a  great  deal  larger  than  anything  the  London 
County  Council^  could  possibly  claim  to  work,  and  T 

*  The    area    was    634    square    miles,    covering    eighty-one    Local 
Authorities  with   an   aggregate   population  of  about  5,000,000. 
^The  area   of  the   County   of   London   is    121    square   miles. 


186        THE    TELEPHONE    IN   GREAT    BRITAIN 

shuuld  have  thought  certainly,  even  with  a  large  body 
like  the  National  Telephone  Company,  with  the  licenses 
granted  to  it.  it  ought  to  be  contented  with  its  own 
area."  These  damaging  insinuations  Mr.  Hanbury 
saw  fit  to  make,  though  Mr.  Arnold  Morley,  who,  as 
Postmaster  General  in  1892  to  1895,  had  supervised 
the  demarcation  of  the  telephone  areas,  had  stated  in 
the  House  of  Commons,  that  "the  settlement  of  the 
areas  was  a  matter  of  great  difficulty  and  complexity, 
and  in  regard  to  it  the  telephone  companies  [/.^.,the  Na- 
tional] had  acted  in  a  very  straightforward  manner."^ 
Again,  in  June,  1898,  Mr.  Hanbury,  as  Chairman  of 
the  Select  Committee  on  Telephones,  was  obliged  to 
admit  that  the  National  Telephone  Company's  Metro- 
politan London  area  had  not  been  enlarged  under  the 
negotiations  of  1892  to  1896;  and  that  Parliament 
had  passed  upon  and  accepted  that  area  as  established 
previous  to  the  year  1892.  In  fact,  all  of  the  large 
areas  embracing  the  great  centers  of  population  had 
been  established  by  the  National  Telephone  Company 
previous  to  1892,  that  is,  long  before  the  question  of 
municipal  telephone  plants  had  appeared.^ 

Mr.  Hanbury  next  stated  that  if  municipal  competi- 
tion with  the  National  Telephone  Company  were  not 
established,  and  if,  furthermore,  the  State  should  fail 

^Hansard's  Parliamentary  Debates;  March  i,  1895;  p.  217,  Mr. 
Arnold   Morley,    Postmaster    General. 

'Report  from  the  Select  Committee  on  Telephones,  1898;  q.  2991 
to  2993,  Mr.  Hanbury,  Chairman,  examining  Mr.  J.  C.  Lamb,  Second 
Secretary  to  Post  Office ;  and  q.  7422,  Mr.  W.  E.  L.  Gaine,  General 
Manager  National  Telephone  Company. 


MR.   HANBURY'S  CHARGES  187 

to  avail  itself,  in  1904,  of  the  right  to  purchase  the  Com- 
pany's plant  and  business  on  arbitration  terms,  the 
State  would  be  at  the  mercy  of  the  National  Telephone 
Mr.  Hanbury  Company,  after  1 904.  The  Company 
suggests  Bad  "would  probably  raise  their  rates,  and 
^"^^^^  might  run  down  the  service,  and  the 

result  would  be  that  the  country  would  get  so  dis- 
heartened with  the  telephone  service  ....  that  there 
would  be  a  great  outcry  throughout  the  country,  and 
we  might  have  to  buy  this  company  up  at  its  own 
price."  This  damaging  insinuation  should  be  judged 
in  the  light  of  the  following  facts :  Before  the  Select 
Committee  of  1895,  Mr.  J.  S.  Forbes,  Chairman  Na- 
tional Telephone  Company,  had  stated  that  the  Com- 
pany would  make  no  further  capital  investment  after 
1904,  but  that  it  would  continue  to  maintain  its  exist- 
ing plant  in  the  highest  state  of  efficiency.^  He  made 
no  suggestion  that  the  Company  would  raise  its  tariff. 
Furthermore,  the  agreements  made  with  Manchester, 
Liverpool,  and  numerous  other  municipalities — agree- 
ments which  the  Company  was  willing  to  make  with 
any  local  authority" — contained  provisions  against  the 
raising  of  the  tariffs.  Finally,  when  Mr.  Forbes  re- 
peated before  the  Select  Committee  of  1898  the  state- 
ment that  the  Company  would  make  no  further  capital 
investments  after  1904,  he  did  not  mention  the  possi- 

^  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895  ;  q.  4943  to  4949. 

*  Report  from  the  Select  Committee  on  Telephones.  1898;  q.  7728 
and  7150,  Mr.  W.  E.  L.  Gaine,  General  Manager;  and  q.  6507,  Mr. 
J.    S.    For])es,    Chairman    National   Telephone    Company. 


188         rilE    TELEPHONE    IN    GREAT    BRITAIN 

bilily  of  raising  the  tariffs/  He  dismissed  with  con- 
tempt Mr.  Hanbury's  query  whether  the  Company 
miglit  not  resort  to  the  tactics  which  he,  Mr.  Hanbury, 
in  Parliament  had  denominated  to  be  within  the  hmits 
of  probabiHty.' 

The  next  damaging  statement  made  by  Mr.  Hanbury 
was  that  the  National  Telephone  Company  was  the  only 
extensive  monopoly  which  was  not  "under  strict  con- 
trol and  very  stringent  regulations,"  as  were  the  rail- 
ways, tlie  water,  gas  and  electric  lighting  companies. 
This  statement  was  made  in  the  face  of  the  fact  that 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6580 
et  passitn. 

^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  6088 
to  6091,  Mr.  Hanbury,  Chairman,  examining  Mr.  J.  S.  Forbes.  Mr. 
Hanbury  :  "Has  it  occurred  to  you,  you  may  say  this  is  a  sugges- 
tion, but  it  is  far  from  me  to  suggest  anything  you  had  not  thought 
of  before,  but  might  not  this  posibility  arise :  that  finding  your 
license  was  going  to  come  to  an  end  in  191 1,  and  finding  that  there 
was  no  adequate  competition  by  the  Post  Office  or  by  the  munici- 
palities, and  finding  that  the  Post  Office  has  got  no  alternative  plan 
to  offer,  it  is  quite  possible  that  the  Company  might  say:  Well, 
we  must  make  hay  while  the  sun  shines;  we  have  only  got  to  191 1  ; 
they  might  raise  their  rates  considerably,  and  perhaps  let  their  plant 
run  down  a  little  ;  that  would  lead  to  very  great  popular  discontent, 
the  telephone  would  have  become  a  great  business  necessity  and 
there  would  be  an  outcry  on  the  part  of  the  public,  and  they  would 
say :  Oh,  you  must  buy  up  the  Company  at  any  cost.  Do  you 
contemplate  any  possibility  of  that  kind  arising?"  Mr.  Forbes: 
"I  do  not  suppose  I  shall  see  it.  When  the  event  arises,  who 
knows  but  you  may  be  upon  the  board  of  the  telephone  company  at 
that  time,  and  if  so  you  could  advise  them  ;  I  am  sure  you  would 
be  most  competent."  Sir  James  Woodhouse:  "At  all  events,  there 
is  precedent  for  that?"  Mr.  Forbes:  "No,  Si-,  there  really  is  no 
object  in  anticipating  that  sort  of  thing."  Mr.  Hanbury:  "But 
that  is  a  possibility,  is  it  not?"  Mr.  Forbes:  "Well,  it  is  a  possi- 
bility ;  but  first  of  all,  it  would  not  be  consistent  with  good  faith 
on  the  part  of  the  telephone  company.  I  do  not  know  what  in 
despair  they  might  be  driven  to  if  they  were  badly  treated."  Mr. 
Hanbury:  "Would  despair  justify  it?"  Mr.  Forbes:  "I  think 
so."     Compare  also  Questions  6661  to  6669. 


MR.   HANBURY'S  CHARGES  189 

the  National  Telephone  Company  time  and  again  had 

offered  to  come  under  the  prohibition 
Mr.  H anbury  s 

Charge  of  against  undue  preference,   as   well  as 

"Unregulated  under  the  obligation  to  supply  at  maxi- 
Monopoly"  ,  .  . 

mum  charges,  m  return   for  statutory 

way-leave  powers.^  That  the  Post  Office  invariably  had 
asked  the  House  of  Commons  to  reject  those  offers,  say- 
ing that  the  telephone  business  was  a  part  of  the  tele- 
graph business  and  therefore  the  prerogative  of  the 
Crown,  and  that  as  such  it  differed  from  the  gas,  water 
and  electric  lighting  businesses,  and  should  not  be 
brought  under  maximum  charges.^  Mr.  Hanbury's 
statement  also  ignored  the  fact  that  under  the  Agree- 
ment of  1892  it  had  become  the  policy  of  the  Govern- 
ment to  cooperate  with  the  National  Telephone  Com- 
pany in  extending  facilities  to  the  public,  holding  over 
the  Company  the  power  to  compete — either  by  means  of 
a  Post  Office  telephone  exchange,  or  by  means  of  a 


'  It  is  the  established  practice  of  Parliament  never  to  impose 
obligations  upon  any  company  that  has  not  statutory  way-leave 
powers. 

^Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  342,  Sir  Robert  Hunter,  Solicitor  to  Post  Office :  "  .  .  .  .  but 
of  course  it  has  to  be  borne  in  mind  that  the  commodity  which  the 
telephone  companies  supply  is  really  a  monopoly  of  the  State.  It 
is  the  State  which  has  the  right  to  transmit  telegrams,  and  these 
licensees  are  merely  acting  under  the  authority  of  the  State  :  and  it 
would  be  a  novel  principle  to  say  that  the  State  should  be  put  under 
conditions  of  that  kind"  [i.  e.  maximum  charges,  or  limitation  of 
dividends].  Compare  also:  Hansard's  Parliamentary  Debates: 
March  22,  1892,  p.  1435,  Sir  James  Fergusson,  Postmaster  General. 
"That  business  is  in  a  very  different  position  to  gas,  electric  light- 
ing and  water  undertakings,  because  none  of  these  trench  upon  or 
touch  the  prerogative  of  the  Crown.  .  .  ." 


inO        THE    TELEPHONE    IN   GREAT    BRITAIN 

municipal  telephone  exchange — in  any  area  in  which  the 
Company  should  fail  of  its  duty.^ 

The  next  charge  which  Mr.  Hanbury  brought  against 
the  National  Telephone  Company  was  that  the  Com- 
pany's alleged  practice  of  giving  free  telephone  service 
to  influential  persons  and  to  subscribers  to  the  Post 
Office  telephone  exchanges,  had  been  a  more  potent 
factor  in  preventing  the  development  of  the  Post  Office 
telephone  exchanges,  than  had  been  the  Treasury 
Minute  of  1883,  which  forbade  the  Post  Office  making 
active  efforts  to  obtain  telephone  subscribers.  Upon 
this  point,  Mr.  Hanbury's  closing  words  were :  "That 
is  a  privilege  which  we  cannot  take  from  them  [i.e.,  the 
Company]  ;  they  must  go  on  exercising  it,  and  probably 

they    may   exercise   it    in    competition 
Mr.  Hanbury s  .  ,  ^^       .  ,  ,      1       ,     „  r-  1 

Charge  of  With  US  or  With  anybody  else    [i.e.,  the 

Personal  Dis-  local  authorities].  When  Mr.  Han- 
bury uttered  these  closing  words,  the 
National  Telephone  Company  had  made  agreements 
with  Liverpool,  Manchester  and  numerous  other  local 
authorities  not  to  give  preferential  rates  to  any  one,^ 
and  it  was  ready  to  make  similar  arrangements  with 
any  local  authority  that  should  give  it  way-leave 
powers.  Nor  was  Mr.  Hanbury's  bald  statement  con- 
sistent with   the  fact  that   the   Company's  numerous 

^Hansard's  Parliamentary  Debates;  March  6,  1899,  p.  1395,  Sir 
James  Fergusson,  who,  as  Postmaster  General  in  1891-92,  had 
negotiated  the  Agreement  of  1892. 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7146 
and  7147.  Mr.  Hanbury  examining  Mr.  Gaine,  General  Manager 
National  Telephone  Company. 


MR.   HANBURY'S   CHARGES  191 

applications  to  Parliament  for  statutory  way-leave 
powers  had  been  accompanied  by  the  offer  to  give  up 
the  right  to  make  preferential  charges.^ 

In  passing,  it  may  be  stated  that  the  Post  Office 
opened  twenty-two  telephone  exchanges  in  the  years 
1 88 1  to  1883;  and  that  when  it  drew  up  the  new 
license,  in  1884,  it  considered  the  question  of  inserting 
a  clause  against  any  licensee  "giving  favor  or  preference 
to  one  person  over  another,"  and  "deliberately  decided" 
not  to  insert  any  such  prohibition.  The  reason  was 
that  in  1884  "all  the  drift  of  public  opinion  was  in 
favor  of  giving  the  telephone  companies  a  free  hand. 
It  was  urged  at  that  time  that  the  Post  Office  had  im- 
posed so  many  restrictions  that  they  were  hampering 
and  preventing  the  development  of  telephonic  enter- 
prise, and  it  was  then  proposed  to  remove  all  the  restric- 
tions and  to  give  the  telephone  companies  a  free  hand."^ 

Mr.  Hanbury  closed  his  speech  with  the  statement 
that  the  Government  would  assent  to  the  appointment 
of  a  Select  Committee  to  which  should  be  referred  the 
question  of  establishing  municipal  telephony.  There- 
upon Mr.  Caldwell  withdrew  his  Motion. 

With  the  exception  of  a  vigorous  speech  made  in  the 
House  of  Commons  on  March  6,  1899,  by  Sir  James 
Fergusson,   Postmaster    General   in    1891-92,    and   a 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7495. 
Mr.  Hanbury  examining  Mr.   Gaine. 

-Report  from  the  Select  Committee  on  Telephones,  1898;  q.  497, 
514,  515  and  540,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 


192        THE    TELEPHONE   IN   GREAT    BRITAIN 

Director  of  the  National  Telephone  Company  since 
July,  1896,  no  adequate  reply  was  made  to  the  charges 
brought  against  the  National  Telephone  Company  by 
Mr.  Hanbury,  in  the  years  1898  and  1899.  The  reason 
was  largely  that  "those  who  were  best  able  to  place  the 
true  facts  of  the  case  before  Parliament 

Parlia»icnt  and  , 

the  Public  too  were,  to  a  considerable  extent,  com- 
busy  to  read  pelled  to  silence  by  the  practice  and 
courtesy  of  the  House,"  they  being  pe- 
cuniarily interested  in  the  National  Telephone  Com- 
pany. Upon  this  aspect  of  the  situation,  Lord  Harris,^ 
a  Director  of  the  Company,  expressed  himself  as  fol- 
lows :  "I  have  heard  it  said,  at  the  conclusion  of  a 
Session  [of  Parliament]  by  one  who  knows  Parlia- 
ment as  well  as  most :  'Now  everybody's  property  is 
safe  for  five  months.'  However,  as  I  say,  I  have  the 
most  profound  conviction  in  the  honesty  of  Parliament, 
as  long  as  it  is  properly  educated,  as  long  as  it 
thoroughly  understands  what  it  is  legislating  about,  but 
that  is  the  difficulty  in  which  Parliament  has  been 
placed  while  the  telephone  question  has  been  discussed. 
People  are  too  busy  now-a-days  to  read  the  lengthy 
Blue  Books,  and  therefore  there  are  many  Members  of 
Parliament  who  do  not  understand  all  the  difficulties 
that  surround  the  very  delicate  service,  and  who  are 
very  ready  to  accept  allegations.  .  .  .  They  have  not  had 


'  Under  Secretary  for  India,  1885-86 ;  Under  Secretary  of  War, 
1886  to  i88g;  Governor  of  Bombay,  1890  to  1895;  Lord-in-Waiting 
to  Queen  Victoria,  1895  to   1900. 


MR.   HANBURY'S  CHARGES  193 

the  opportunity  of  hearing  the  other  side  of  the  ques- 
tion. .  .  "1 

Mr.  Hanbury's  attack  upon  the  National  Telephone 
Company  recalls  to  mind  the  words  used  by  Lord 
Kelvin,  the  world's  foremost  student  of  electricity, 
while  discussing  the  affairs  of  the  National  Telephone 
Company,  in  1900,  when  the  Post  Office  and  the 
London  County  Council  were  harassing  the  Company 
for  the  purpose  of  forcing  it  to  promise  inter-com- 
munication with  the  subscribers  to  the  Post  Office's 
proposed  London  Telephone  exchanges,  which  ex- 
changes finally  were  opened  in  March,  1902.  Said 
Lord  Kelvin :  "I  do  not  like  to  be  too  optimistic,  and 
certainly  I  cannot  feel  quite  convinced  that  all  the 
agitation  for  opposition  [to  the  Company]  is  wholly 
in  the  public  interest,  and  wholly  in  a  spirit  of  friend- 
liness to  the  Company  in  the  service  of  the  public.  I 
believe  there  is  a  certain  leaven  of  the  ugly  side  of  hu- 
man nature  in  what  has  been  going  on.  I  do  not  say 
that  it  is  mere  jealousy,  and  dislike,  and  rivalry  of  an 
unkind  nature.'*^  .... 

The  effect  of  Mr.  Hanbury's  attack  upon  the  Na- 
tional Telephone  Company  was  the  appointment,  in 
1898,  of  a  Select  Committee  to  inquire  and  report 
whether  the  Government  ought  to  authorize  municipal 
competition  with  the  National  Telephone  Company. 

^  The  Electrician  :  May   12,   1899. 
"The  Electrician ;  May   11,  1900. 

13 


CHAPTER  XIII 

THE    EVIDENCE    PRESENTED    BEFORE    THE    SELECT 
COMMITTEE  OF  1898 

The  House  of  Commons  orders  the  appointment  of  a  Select 
Committee  to  consider  and  report  upon  the  question  of  granting 
telephone  licenses  to  local  authorities.  Sir  Robert  Hunter,  So- 
licitor to  Post  Office,  urges  the  necessity  of  giving  the  National 
Telephone  Company  adequate  way-leaves.  Mr.  Forbes,  Chair- 
man National  Telephone  Company,  and  Mr.  Gaine,  General 
Manager,  argue  that  under  the  burdens  and  disabilities  im- 
posed upon  the  Company  by  Parliament,  the  Company's  charges 
must  necessarily  be  relatively  dear,  while  its  services  must  be 
less  adequate  and  less  efficient  than  the  Company  would  wish. 
Mr.  Arnold  Morley,  Postmaster  General  from  1892  to  1895,  as 
well  as  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office, 
express  themselves  against  competition  in  the  telephone  business. 
The  Association  of  Municipal  Corporations  expresses  itself  in 
favor  of  municipal  telephone  exchanges,  as  the  alternative  to 
the  Post  Office  taking  over  the  entire  telephone  business.  The 
evidence  as  to  the  manner  in  which  the  National  Telephone 
Company  exercised  its  right  to  refuse  service.  The  evidence 
as  to  the  Company's  policy  and  practice  in  the  matter  of  estab- 
lishing telephone  exchanges  in  small  places  and  thinly  popu- 
lated  districts. 

In  consequence  of  the  facts  and  circumstances  nar- 
rated in  the  preceding  chapters,  the  House  of  Com- 
mons, on  May  9,  1898,  ordered:  "That  a  Select 
Committee  be  appointed  to  inquire  and  report  whether 
the  telephone  service  is,  or  is  calculated  to  become,  of 
such  general  benefit  as  to  justify  its  being  undertaken 

194 


THE  EVIDENCE  PRESENTED  195 

by  municipal  and  other  local  authorities,  regard  being 
had  to  local  finance;  and,  if  so,  whether  such  local  au- 
thorities should  have  power  to  undertake  such  service 
in  the  districts  of  other  local  authorities  outside  the 
area  of  their  ow'n  jurisdiction,  but  comprised  wholly 
or  partially  in  the  same  telephone  area,  and  what  pow- 
ers, duties,  and  obligations  ought  to  be  conferred  or 
imposed  upon  such  local  authorities. 

"That  the  Minutes  of  Evidence  taken  before  the 
Select  Committee  on  the  Telephone  Service  in  the  Ses- 
sion of  1895,  and  Report  ol  the  Commissioner  and  the 
Evidence  taken  before  him  in  the  inquiry  recently  held 
at  Glasgow,  be  referred  to  the  Committee  for  consid- 
eration in  so  far  as  they  relate  to  the  subject  of  the 
present  inquiry," 

Sir  Robert  Hunter,  Solicitor  to  the  Post  Office,  sub- 
mitted to  the  Committee  "as  one  matter  which  they  might 

^   ,■  ,        consider  in  making  their  Report,  wheth- 

J  estimony    of  &  t 

Solicitor   to  tv  the  time  had  not  come  when  the  Post- 

Post  OMce  master  General — and  his  licensees,  un- 

der proper  restrictions* — should  not  be  put  in  the  same 
position  with  regard  to  roads  that  other  undertakers 
of  great  public  undertakings  [/.  e.,  water  works,  tram- 
ways and  electric  light  plants]  are  put.  and  whether  he 
should  not  be  at  liberty  to  take  up  the  roads  for  the 
necessary  purpose  of  his  undertaking  upon  giving  suit- 
able notice,  and  subject  to  the  supervision  of  the  road 

*  That  is,  the  license  granted  by  the  Postmaster  General  must 
be   submitted   to   Parliament    for   confirmation   or   rejection. 


196         THE    TELEPHONE   IN   GREAT    BRITAIN 

authority  which  obtains  in  all  these  matters.  Then 
if  the  local  authority  prefer  to  do  the  road  work  them- 
selves, they  should  be  able  to  do  it."  Sir  Robert  Hun- 
ter also  asked  the  Committee  to  "consider  whether  in 
case  they  desired  that  the  telephone  should  be  so  very 
largely  extended  as  he  had  gathered  from  the  course  of 
the  evidence  that  they  did,  the  time  had  not  come  when 
the  Postmaster  General,  and,  under  proper  restrictions, 
any  other  person  supplying  telephonic  communication, 
should  not  have  some  power  of  making  attachments  to 
private  property."^ 

Mr.  W.  E.  L.  Gaine,  General  Manager  National  Tele- 
phone Company,  testified  that  120,000  miles  of  wire, 
out  of  a  total  of  143,000  miles,  were  subject  to  six 
months'  notice  of  removal.  He  added  that  the  absence 
of  underground  way-leaves  had  compelled  the  Com- 
pany to  erect  four  exchanges  in  the  City  of  London — 
area  one  square  mile — where  one  exchange  would  have 
sufficed.  Finally,  several  hundred  people  in  Metro- 
politan London  had  signed  contracts  for  telephones, 
but  the  Company  were  absolutely  unable  to  connect 
them.^ 

The  Tariffs  ^"^^  J'  ^-  Fo^'bes,  Chairman  National 

are  Relativeh        Telephone  Company,  testified  that  the 
*^  relative  dearness  of  the  telephone  serv- 

ice in  the  United  Kingdom  was  due  to  three  factors : 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6917 
and  6955. 

■Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7570, 
7413  and  7303. 


THE  EVIDENCE  PRESENTED        197 

the  absence  of  way-leaves,  the  Post  Office  royalty, 
and  the  hmitation  of  the  hfe  of  the  Company's 
franchise.  He  stated  that  in  MetropoHtan  London  the 
Company  was  paying  on  an  average  $7  a  year  per  sub- 
scriber for  way-leaves  over  the  house-tops,  while  the 
Post  Of^ce  royalty  averaged  $6  per  subscriber.  He 
added  that  if  the  Government  would  give  the  Company 
way-leaves,  and  forego  the  royalty,  the  Company  would 
reduce  its  Metropolitan  London  Tariff  by  $15  a  year. 
At  this  time  the  average  annual  sum  paid  per  Metro- 
politan London  subscriber  was  $72.50. 

Mr.  Forbes  added  that  the  annual  sinking  fund  con- 
tributions necessitated  by  the  fact  that  the  Company's 
license  would  expire  in  191 1  constituted  a  heavy  annual 
burden.  He  stated  that  it  was  commonly  overlooked 
that  an  expanding  telephone  business  called  for  heavy 
annual  capital  investments,  and  that  those  investments 
were  made  upon  yearly  decreasing  tenure.     In  fact,  in 

J       ,       .  IQ04,  seven  years  before  the  expiry  of 

Investment  y   ^'  j  ^    j   ^ 

under  Short-  the  franchise,  the  Company  would  dis- 
lived  Franchises  continue  the  further  investment  of 
capital  on  its  own  account,  except  in  so  far  as  such  in- 
vestment should  be  necessary  for  maintaining  the  plant 
at  the  highest  efficiency.  As  for  the  taking  on  of  new 
subscribers,  the  Company  would  go  to  the  Post  Office 
and  say:  "The  telephone  cannot  stop  expanding,  and 
we  will  spend  as  much  money  as  you  like  under  your 
control  up  to  191 1,  but  you  must  find  the  money."  No 
one  could  afiford  to  invest  capital  on  a  seven  year  basis.* 

^Report  from  the  Select  Committee  on  Telephones.  1808;  q.  5862, 
6570,  6640,  6082  and  following,  and  6580  to  6624,  Mr.  J.   S.  Forbes. 


198         THE    TELEPHONE    IN   GREAT    BRITAIN 

Mr.  Gaine,  General  Manager,  testified  upon  another 
handicap  upon  the  National  Telephone  Company,  name- 

,  -  .  o      •     Iv  :  the  Company's  inability  to  abandon 

Measured  Service    ■'  tr      j  j 

versus  Unlimited  the  flat  rate  and  establish  the  measured 
^^''"^'"^'^  service.     He  said  the  measured  service 

would  greatly  extend  the  use  of  the  telephone  by  bring- 
ing in  the  small  user,  who  was  deterred  by  the  existing 
flat  rates.  But  the  large  users  of  the  telephone,  who 
commonly  were  people  of  much  influence,  were  opposed 
to  the  measured  service,  and  the  Company's  general 
position  in  the  community  was  so  difiicult,  not  to  say 
precarious,  that  without  the  aid  of  the  Government  the 
Company  could  not  afford  to  abolish  the  flat  rate  and 
establish  the  measured  service.  The  establishment  of 
the  measured  service  alongside  of  the  flat  rate  was  out 
of  the  question,  because  it  was  unsound  financially. 
Finally,  Mr.  Gaine  cited  the  Company's  unsucessful 
effort,  in  1892,  to  introduce  the  measured  in  service  in 
Shefiield.  The  proposed  Sheffield  rate  had  been  $35 
a  year,  with  one  thousand  free  calls,  and  a  charge  of 
two  cents  per  call  in  excess  of  that  number.^ 

Mr.  Arnold  Morley,  who  had  been  Postmaster  Gen- 
eral in  1892  to  1895,  testified  at  length  upon  the  sub- 
Mr.  Arnold  J^^*  °^  competition.  He  said  that 
Morley  opposed  three  years  of  very  close  attention  to 
to  Competition  ^^^  question  had  convinced  him  that  the 
Post  Office  should  exercise  its  reserved  power  to  com- 
pete with  the  National  Telephone  Company,  only  in  the 

'  Report  from  the  Select  Committee  on  Telephones,  1898 ;  q.  7614 
to  7646,  and  7676  to  7678. 


THE  EVIDENCE  PRESENTED        199 

event  of  a  "clear  case  of  the  Company  not  giving  a 

service  which  was  efiicient  and  fairly  cheap."     So  much 

had  he  been  opposed  to  competition,  that  he  had  been 

unwilling,  as  Postmaster  General,  to  recommend  that 

the  Post  Office  compete  actively  with  the  Company  in 

the  few  places  in  which  the  Post  Office  had  established 

telephone   exchanges.     He    added    that   his    views   on 

competition  were  shared  by  the  experienced  officials  of 

the  Post  Office  as  well  as  by  "almost  everyone  who  had 

had  experience  in  telephone  matters."^ 

Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office, 

said  he  deemed  it  "very  undesirable  that  a  private  com- 

HT  7-  ^  r  L  panv  should  be  allowed  to  reach  a  po- 
Mr.  J.  C.  Lamb      ^       -^  _ 

opposed  to  sition  of  monopoly  such  as  the  National 

Competition  Telephone  Company  promised  to  reach ; 

but  on  the  other  hand  he  was  perfectly  convinced  that 
great  public  inconvenience  and  confusion  would  result 
from  the  establishment  of  rival  systems."  He  added 
that  "it  was  entirely  erroneous  to  say  that  the  Na- 
tional Telephone  Company  were  mere  licensees  of  the 
Postmaster  General."  He  denominated  the  Agree- 
ment of  1892  a  working  agreement  w^hich  provided  for 
"cooperation,  alliance  and  harmonious  working"  be- 
tween the  Post  Office  and  the  Company.  He  added 
that  actual  experience  had  proved  that  the  possibility 
of  competition  held  over  the  Company  as  a  corrective, 
had  produced  certain  good  results  in  the  past,  and 
would  produce  them  again,  should  occasion  arise. 

'  Report  from  the  Select  Committee  on  Telephones,  1898  ;  q.  6701 
to  6746. 


2U0         THE    TELEPHONE    IN   GREAT    BRITAIN 

Mr.  Laml)  expressed  the  opinion  tliat  the  Post  Office 
ought  to  take  over  the  National  Telephone  Company's 
property  in  191 1.  That  some  years  before  that  time 
it  should  approach  the  Company  with  the  view  to 
agreeing  upon  the  price  to  be  paid.  Should  the  nego- 
tiations come  to  naught,  through  the  Company  asking 
too  high  a  price,  the  Post  Office  should  begin  immedi- 
ately the  construction  of  telephone  plants  throughout 
the  United  Kingdom,  and  replace  bodily  the  Company 
in  1911. 

Mr.  Lamb  expressed  at  length  his  personal  views  on 
competition  by  the  municipalities.  He  said,  if  the 
Company  should  meet  that  competition,  the  Govern- 
ment would  have  to  pay  a  large  sum  for  good-will  in 
the  event  of  its  purchasing  the  Company's  plant  in  1904. 
He  said :  "If  you  are  dealing  with  a  system  which  is 
open  to  attack  [competition],  you  can  argue  [before 
the  arbitrator]  that  its  good-will  is  not  of  high  value; 
but  if  you  are  dealing  with  a  system  which  has  been 
attacked  and  has  repelled  the  attack,  you  are  then  in 
the  presence  of  something  that  has  proved  itself  prac- 
tically unassailable,  and,  therefore,  a  thing  with  a  good- 
will of  high  value."  He  added  that  it  was  possible 
that  the  State  ultimately  would  have  to  take  over  the 
telephones,  and  therefore  prudence  forbade  entering 
upon  any  policy  which  would  be  liable  to  reduce  the 
telephone  tariffs  to  an  unremunerative  basis.  He  be- 
lieved the  policy  of  municipal  competition  was  open  to 
that  objection,  because  it  would  put  the  making  of 


THE  EVIDENCE  PRESENTED        201 

tariffs  into  the  hands  of  men  who  proceeded,  not  on 
the  basis  of  experience,  but  on  the  basis  of  "mere 
estimate." 

Mr.  Lamb's  next  argument  was  that  municipaliza- 
tion would  "strike  at  the  root  of  any  development  of 
the  telephone  system  in  rural  districts."  The  local 
authorities  would  confine  themselves  to  the  rich  fields. 
On  the  other  hand,  the  State  could  not  undertake  to 
supply  the  non-paying"  regions,  unless  it  were  permitted 
to  make  a  profit  in  the  richer  fields.  The  result  would 
be  that  the  poorer  fields  would  be  left  entirely  without 
telephonic  facilities.  He  added  that  it  was  "idle"  to 
say  that  the  local  authorities  were  willing  to  give  up 
their  licenses  in  191 1.  If  the  municipal  telephone 
businesses  should  prove  successful,  no  Government 
would  dare  to  take  those  businesses  away  from  the 
municipalities. 

Finally,  under  the  system  of  municipal  licenses,  the 
difficulties  of  administration  would  increase  enormous- 
ly. In  dealing  with  one  great  company,  the  Post  Ofiice 
had  to  arrive  at  an  understanding  with  one  manage- 
ment only,  but  in  dealing  with  innumerable  local  au- 
thorities throughout  the  United  Kingdom,  the  Post 
Office  would  be  "incessantly  in  dispute  with  innumer- 
able managers  on  questions  of  the  interpretation  of  the 
license  and  matters  of  practical  working."  For  ex- 
ample, the  States  of  Guernsey  had  scarcely  got  their 
telephone  plant  into  working,  but  they  had  already 
been  disouting  with  the  Post  Office  on  points  which 


202        THE   TELEPHONE   IN   GREAT   BRITAIN 

long  ago  had  been  settled  with  the  National  Telephone 
Company.  Such  disputes  would  lead  the  local  authori- 
ties to  refuse  the  Post  Office  way-leaves  for  telegraphs 
and  for  telephone  trunk  wires,  a  practice  which  already 
had  made  it  extremely  difficult  for  the  Post  Office  to 
meet  the  public  demands  for  increased  telegraphic  and 
telephonic  facilities. 

In  conclusion,  Mr.  Lamb  stated  that  the  great  Cham- 
bers of  Commerce,  and  the  most  influential  newspapers 
[including  the  Glasgozv  Herald  and  the  Scofsinan], 
were  not  in  sympathy  with  the  demand  for  the  munici- 
palization of  the  telephone.^ 

Mr.  W.  H.   Preece,  Engineer-In-Chief  to  the  Post 

Office,  testified :  "I  think  the  whole  desire  to  hand  over 

„    „,  the  telephone  to  the  municipalities  is 

Mr.  W.  H.  Preece  ^  .  ^ 

opposed  to  based  on  three  assumptions.     The  first 

Municipal  Tele-     is  that  the  Post  Office  cannot  do  the 

plwiic  Plants 

w^ork  properly  or  cheaply ;  the  second 

is  that  the  National  Telephone  Company  do  not  do 
their  work  properly  (I  will  not  say  cheaply)  ;  and  the 
third  is  that  the  municipalities  can  do  it  better  and 
cheaper.  Now  I  contend  that  all  these  three  assump- 
tions are  wrong."  He  added:  "If  it  should  be  the 
misfortune  of  this  Committee  to  recommend  that 
municipalities  have  a  license,  the  municipalities  would 
walk  oflf  with  the  cream  that  would  enable  us  [the  Post 

^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  1118. 
7807,  1028  to  1037,  7781,  7784,  7785,  7796,  7795.  7798  and  7792;  and 
Report  from  the  Select  Committee  on  the  Telephone  Service,  1895 ; 
q-  5279,  5261,  5258,  5225  and  5272. 


THE  EVIDENCE  PRESENTED  203 

Office]   to  compensate  ourselves  for  the  loss  in  these 
[non-paying]   rural  districts."^ 

The  Association  of  Municipal  Corporations,  which 

consists  of  268  English  cities,  but  counts  no  Scotch 

cities   among   its   members,    sent    four 
The  Demands  of  .  ,        1     r         .1       o  1     .. 

the  Association      representatives  to  lay  before  the  Select 

of  Municipal  Committee   the   resolutions   passed  by 

Corporations  ^j^^  Association's  Council,  on  April  28, 

1898.  The  first  resolution,  v^hich  had  been  carried 
almost  unanimously,  was :  "That  in  the  opinion  of  this 
Council  the  subject  of  telephonic  supply  in  this  country 
should  be  treated  as  an  Imperial  and  not  as  a  local  one, 
and  that  the  Postmaster  General  should  have  the  sole 
control  of  the  telephone  system."  The  second  resolu- 
tion, carried  by  a  vote  of  19  to  17,  was:  "That  in  the 
event  of  the  Postmaster  General  not  taking  over  the 
telephone  service  it  should  be  competent  for  municipal 
and  other  local  authorities  to  undertake  such  service 
within  areas  composed  of  their  own  districts  or  a  com- 
bination of  such  districts."  The  opponents  of  this 
resolution  had  held  "that  the  importance  to  commercial 
centers  of  being  enabled  to  communicate  not  only  with- 
in their  own  particular  municipal  or  urban  area  but 
outside  that,  and  to  communicate  with  other  towns  is 
so  great  that  the  service  cannot  be  satisfactorily  sup- 
plied unless  the  whole  concern  is  under  the  control  of 
one  body" :  and  that  the  National  Telephone  Company 

^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  5359, 
5325.  5366,  S377,  .■;364  and  5365. 


204        THE   TELEPHONE   IN   GREAT   BRITAIN 

should  be  that  body,  if  the  Postmaster  General  were 
not  made  that  body.  The  third  resolution,  carried  un- 
animously, was :  "That  no  powers  should  be  given  to 
any  telephone  company  which  will  enable  them  to  in- 
terfere with  streets  or  with  the  rights  of  individuals  in 
property,  unless  statutory  conditions  and  obligations 
are  at  the  same  time  imposed  on  the  company  for  the 
protection  of  the  public,  particularly  with  regard  to 
maximum  charges,  maximum  dividends,  and  obliga- 
tions to  supply."^ 

Mr.  H.  E.  Clare,  Town  Clerk  of  Liverpool,  and  one 
of  the  representatives  of  the  Association  of  Municipal 
Corporations,  testified  that  in  return  for  the  grant  of 
underground  way-leaves,  the  National  Telephone  Com- 
pany had  contracted  with  Liverpool  and  other  cities  to 
give  no  undue  preference,  to  assume  the  obligation  to 
supply,  as  well  as  not  to  raise  the  tariff  then  in  force. 
And  Mr.  W.  E.  L.  Gaine,  General  Manager  National 
Telephone  Company,  added  that  the  Company  was 
"absolutely"  prepared  to  make  similar  contracts  with 
any  other  local  authorities.^  Therefore,  so  far  as  the 
third  resolution  was  concerned,  the  only  demand  of  the 
Association  that  could  not  be  satisfied  at  the  pleasure 
of  the  local  authorities,  was  the  demand  that  Parlia- 
ment should  fix  general  maximum  charges  as  well  as 
the  maximum  dividend  to  be  paid  by  the  Company. 

*  Report  from  the  Select  Committee  on  Telephones,  1898;  p.  503 
and  q.  3148  and  4276. 

^Report  from  the  Select  Committee  on  Telephones,  iSqS:  q.  4282 
and  4292,  Mr,  Clare ;  and  q.  7728,  Mr.  Gaine. 


THE  EVIDENCE  PRESENTED  205 

And  there  the  difficulty  arose  not  from  the  unwilling- 
ness of  the  National  Telephone  Company,  but  from  the 
unwillingness  of  the  Government.  In  1884,  1885, 
1888,  1892  and  1893,  the  Company  had  lodged  Bills 
asking  for  statutory  way-leave  powers  on  the  condition 
of  the  acceptance  of  the  statutory  obligations  which  it 
was  the  established  policy  of  Parliament  to  impose 
whenever  it  granted  statutory  powers  to  a  public  serv- 
ice company.  In  each  case  the  Postmaster  General  had 
asked  the  House  of  Commons  to  reject  those  Bills  with- 
out discussion,  on  the  twofold  ground  that  the  licensee 
of  the  Post  Office  should  have  no  powers  not  delegated 
by  the  Post  Office;  and  that  Parliament  should  not 
impose  restrictions  upon  the  profits  made  by  a  licensee 
of  the  Post  Office  who  was  exercising  the  monopoly 
rights  of  the  Post  Office,  rights  denominated  the 
"prerogative  of  the  Crown."  And  yet,  no  less  a  per- 
son than  Mr.  Hanbury,  Financial  Secretary  to  the 
Treasury  in  1895  to  1900,  habitually  spoke  in  the 
House  of  Commons,  as  the  Representative  of  the  Post- 
master General,  as  if  the  question  of  maximum  charges 
were  one  between  the  National  Telephone  Company  and 
Parliament,  and  not  a  question  between  the  Govern- 
ment of  the  day  and  Parliament, 

The  reason  for  the  persistent  refusal  of  the  succes- 
sive Governments  of  the  day  to  allow  the  question  of 
the  imposition  of  statutory  limitations  and  obligations 
to  proceed  to  the  stage  of  discussion  by  the  House  of 
Commons  have  been  stated  in  previous  chapters.    They 


206        THE    TELEPHONE    IN    GREAT    BRITAIN 

were  briefly,  unwillingness  to  give  the  Company  the 
unrestricted  power  to  expand,  which  statutory  way- 
leave  powers  would  have  given ;  and  fear  lest  the  House 
of  Commons  should  impose  maximum  charges  which 
would  make  unremunerative  the  business  of  the  Com- 
pany, a  business  which  the  Government  contemplated 
taking  over  in  191 1.  In  explanation  of  this  apprehen- 
sion, it  should  be  added  that  the  public  demand  tor  the 
imposition  of  maximum  charges,  rested  on  the  assump- 
tions that  telephone  exchanges  could  be  installed  in 
Metropolitan  London  and  in  the  large  provincial  cities 
at  an  average  capital  expenditure  per  subscriber  of  re- 
spectively $190  and  $90;  and  that  they  could  be  oper- 
ated profitably  on  a  flat  rate  of  $50  to  $60  in  Metro- 
politan London,  and  a  flat  rate  of  about  $25  in  the  large 
provincial  cities.  The  Post  Office,  on  the  other  hand, 
persistently  denied  the  soundness  of  those  assumptions. 
In  1898  it  tendered  no  estimates  of  the  cost  of  installing 
telephone  exchanges,  lest  those  estimates  be  quoted 
against  it  in  the  event  of  the  purchase  of  the  Com- 
pany's plant  in  1904,  on  arbitration  terms.  But  in 
1895,  Mr.  W.  H.  Preece,  Engineer-in-Chief  to  Post 
Office,  tendered  to  the  Select  Committee  on  Telephones 
an  estimate  of  $275  per  subscriber  for  Metropolitan 
London,  and  $225  per  subscriber  for  the  provinces.* 
As  to  the  second  assumption,  the  Post  Office  for  some 
years  past  has  maintained  that  a  cheap  telephone  serv- 

^  Report  of  the  Select  Committee  on  Telephones,   1898  ;q.  4351, 
Mr.  Clare,  Town  Clerk  of  Liverpool. 


THE  EVIDENCE  PRESENTED        207 

ice  cannot  be  given  by  means  of  a  flat  rate ;  that  it  can 
be  given  only  by  means  of  the  measured  service.  On 
the  other  hand,  the  pubhc  has  rejected  the  measured 
service  poHcy,  and  has  demanded  a  low  flat  rate. 

In  passing  it  may  be  stated  that  it  is  true  that  when 
the  Post  Office  established  telephone  exchanges  in 
Metropolitan  London,  it  established  a  flat  rate  along 
side  of  a  measured  service  rate.  But  it  did  that  in 
deference  to  public  opinion,  and  against  its  best  judg- 
ment. Before  the  Select  Committee  of  1905,  for 
example,  Mr.  H.  Babington  Smith,  Permanent  Secre- 
tary to  Post  Office,  said :  "I  should  like  to  exp-ress  a 
very  clear  opinion  that  if  it  could  be  effected,  the  right 
thing  to  do  would  be  to  get  rid  of  the  unlimited  service 
rate  altogether."  He  stated  that  the  flat  rate  tended 
to  make  the  large  users  "overload"  their  telephone  line 
before  subscribing  to  a  second  line  and  third  line.  Mr. 
J.  Gavey,  Engineer-in-Chief  to  Post  Office,  explained 
that  such  "overloading"  led  to  great  public  dissatisfac- 
tion being  produced  by  the  frequent  response  from 
"central"  that  the  line  was  engaged,  besides  increasing 
the  cost  of  operation.  It  took  as  much  of  the  opera- 
tor's time  to  answer  a  call,  test  a  line,  and  reply:  "line 
engaged,"  as  it  did  to  connect  with  the  person  called. 
He  added  that  the  flat  rate  also  encouraged  "trivial" 
conversation,  and  thus  increased  the  cost  of  operation. 
In  support  of  that  statement,  he  said  that  on  the 
assumption  that  80  per  cent,  of  the  calls  originating  at 
any  one  exchange  would  have  to  be  put  through  a 


208        THE   TELEPHONE   IN   GREAT    BRITAIN 

second  exchange,  the  annual  cost  of  operation  in  Metro- 
poHtan  London,  was  $6.28  per  subscriber  for  4  calls 
a  day,  $11.36  for  8  calls  a  day,  and  $15.84  for  12  calls 
a  day.  His  conclusion  was  that  "a  low  flat  rate  would 
spell  financial  ruin  and  an  ultimate  raising  of  the  rate."^ 

Because  of  the  "campaign"  use  which  Mr.  Hanbury 
and  others  made  of  the  fact  that  the  National  Telephone 
The  Right  to  Company  was  not  under  obligation  to 
Refuse  Service  supply  service  to  all  applicants,  but 
possessed,  as  well  as  exercised,  the  power  to  pick  and 
choose,  it  is  necessary  to  present  the  evidence  on  the 
manner  in  w^hich  the  Company  exercised  the  power  in 
question.  In  the  first  place  the  Company  refused  to 
serve  any  one  who  declined  to  give  the  Company  per- 
mission to  attach  to  his  property  fixtures  or  poles  for 
the  stringing  of  wires  which  were  to  serve  other  of  the 
Company's  customers.  Upon  this  practice  the  Com- 
missioner at  the  Glasgow  Inquiry  commented  as  fol- 
lows :  "I  do  not  see  anything  unfair  in  a  person  who 
uses  the  telephone  himself  being  requested  to  give  fa- 
cilities for  extending  its  use  to  others."  Furthermore, 
the  London  County  Council,  which  body  counted  upon 
having  underground  way-leave  powders,  proposed  to 
make  it  a  condition  of  supply  that  each  subscriber 
"provide  one  support  for  wires  free  of  charge,"  adding 
that  thus  the  County  Council  Telephone  Exchange 
would  obtain  "a  very  large  number  of  supports  free  of 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  354,  2114,  514,  and  1802  to  1808. 


THE  EVIDENCE  PRESENTED  209 

rental."  Sir  Robert  Hunter,  Solicitor  to  Post  Office, 
denominated  the  practice  in  question  as  the  imposition 
by  the  National  Telephone  Company  of  an  "exception- 
ally onerous  condition."  But  he  added  that  if  the  Post 
Office  were  operating  telephone  plants  and  "were  pre- 
vented from  getting  at  a  [an  intending]  subscriber's 
house,  or  a  whole  district,  by  the  refusal  of  persons  to 
give  way-leaves  [over  the  house-tops],  of  course,  the 
Post  Office  would  not  supply  them."^ 

The  Company  also  refused  to  supply  any  one  who 
was  unwilling  or  unable  to  give  security  for  the  proper 
care  of  the  instruments  and  other  property  to  be  in- 
stalled on  the  applicant's  premises.  The  suggestion 
that  the  time  might  arise  when  the  Company  would 
refuse  a  "reputable"  applicant  because  in  the  particular 
area  concerned  the  Company's  business  had  reached 
the  point  at  which  it  would  be  unprofitable  to  take  on 
new  subscribers,  the  Chairman  of  the  Company 
repudiated  with  the  words :  "Of  course,  a  right  which 
you  cannot  [in  fact,  as  distinguished  from  theory]  ex- 
ercise, and  do  not  exercise,  and  which  it  would  be  folly 
to  suggest  we  exercised ;  we  should,  of  course,  have  no 
hesitation  in  giving  up ;  what  we  want  protection  from 
is  disreputable  people."^     In  this  connection  it  should 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  5947 
to  5971,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company, 
and  Sir  Robert  Hunter,  Solicitor  to  Post  Office ;  and  Report,  etc., 
by  Andrew  Jameson,  Q.  C,  etc.,  into  the  Telephone  Exchange  Service 
in  Glasgoiv,  1897  ;  p.  8. 

*  These  statements,  of  course,  do  not  apply  to  the  period  which 
would  begin  with  1904,  when  the  Company  would  be  obliged  to 
discontinue  any  further  capital  investment,  that  is,  would  be 
obliged  to  discontinue  taking  on  any  new  subscribers  whatever. 

14 


210        THE   TELEPHONE   IN   GREAT   BRITAIN 

be  remembered  that  The  Gasworks  Clauses  Act,  1871, 
contains  this  clause:  "The  companies  are  obliged  to 
serve  any  premises  within  25  yards  of  their  mains  but 
only  on  condition,  .  .  .  .  (2),  that  the  owner  or 
occupier  agrees  to  take  a  supply  for  at  least  two  years, 
the  payment  for  which  must  amount  to  20  per  cent,  per 
annum  on  the  outlay  of  the  undertakers  in  providing 
pipes;  (3)  that  the  owner  or  occupier  gives  security; 
and  (4),  that  supply  may  be  discontinued  if  security 
becomes  invalid."^ 

The  nature  of  the  "campaign  of  education"  con- 
ducted by  Mr.  Hanbury  and  others  makes  it  necessary 
to  review  also  the  evidence  submitted  on  the  question 
Service  in  o^  the  policy  of  the  National  Telephone 

Small  Places  Company  in  the  matter  of  establishing 
telephone  exchanges  in  small  places.  Upon  that  ques- 
tion Mr.  Arnold  Morley,  who  had  been  Postmaster 
General  in  1892  to  1895,  stated :  "So  far  as  I  know, 
wherever  there  was  a  reasonable  demand  for  the  tele- 
phone, the  National  Telephone  Company  gave  a  serv- 
ice." He  added  that  in  his  opinion  it  would  not  have 
been  a  wise  policy  for  the  company  to  establish  plants 
before  there  was  a  reasonable  demand,  with  a  view  to 
making  "the  supply  create  the  demand."^ 


^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  5927, 
5941,  S94S,  5922  and  5918,  Mr.  J.  S.  Forbes,  Chairman  National  Tele- 
phone Company. 

'Report  from  the  Select  Committee  on  Telephones,  1898;  q.  6721 
to  6725. 


THE  EVIDENCE  PRESENTED        211 

Mr.  J.  C.  Lamb,  Second  Secretary  to  the  Post  Office, 
from  1892  on  had  given  the  most  minute  attention  to 
this  subject.  He  was  asked :  "As  a  matter  of  fact,  in 
these  small  and  sparsely  populated  districts,  has  the 
National  Telephone  Company  put  up  any  facilities  for 
the  public?"  He  answered:  "My  belief  is  that  they 
have  very  largely  extended  the  system  in  such  districts 
as  you  describe."  He  was  again  asked:  "As  a  matter 
of  fact,  do  the  National  Telephone  Company  go  into 
any  area  where  they  cannot  expect  a  reasonable  profit ; 
they  are  a  trading  company  for  the  purpose  of  making 
profit  for  the  shareholders?"  He  replied:  "I  think 
they  go  there  sometimes  with  a  view  to  supporting 
their  general  system,  and  making  it  felt  that  their  sys- 
tem is  a  national  system ....  I  think  they  have  some 
regard  for  their  position  in  the  country  as  practical 
monopolists."  He  was  further  asked :  "Mr.  Forbes 
said,  in  his  evidence,  that  there  was  no  sentiment  about 
business;  that  was  sentiment?"  He  replied:  "No,  I 
do  not  think  it  is  sentiment;  I  think  it  is  simply  part  of 
a  plan;  they  are  one  institution  endeavoring  to  carry 
out  a  service  throughout  the  country,  and  my  belief  is 
that  they  endeavor  to  look  at  their  service  as  a  national 
one.  I  daresay  they  think  it  protects  their  general 
system  against  competition,  if  they  can  say  to  the  pub- 
lic :  We  are  going,  not  merely  to  places  where  we  can 
get  an  immediate  return,  but  we  are  endeavoring  to 
serve  the  public  generally,  I  think  that  is  not  sentiment, 
that  is  business."     Mr.  Cawley,  who  had  put  the  pre- 


212         THE   TELEPHONE   IN    GREAT   BRITAIN 

ceding  question,  now  queried:  "Yes,  that  is  business. 
In  other  words,  if  the  National  Telephone  Company 
thought  there  was  any  danger  of  a  new  company  start- 
ing, they  would  go  to  that  place  and  be  there  first,  I 
suppose?"  Mr.  Lamb  replied  :  "I  think  they  would  go 
there  now ;  they  are  willing  to  go."^ 

Sir  James  Fergusson,  who  had  been  Postmaster 
General  in  1891-92,  and  in  1896  had  become  a  Director 
of  the  National  Telephone  Company,  testified  that  "it 
was  a  common  thing  in  England"  for  the  Company  to 
open  an  exchange  where  there  were  only  10  or  12  sub- 
scribers. "Wherever  a  few  people,  sufficient  to  make 
the  thing  pay,  have  desired  an  exchange,  the  Company 
has  been  accustomed  to  open  one,  an  enormous  number 
have  been  opened  in  that  way ;  of  course,  they  grow  by 
degrees."^ 

Mr.  Hanbury,  Financial  Secretary  to  the  Treasury, 
was  Chairman  of  the  Committee  to  which  was  ten- 
Mr.  Hanbury  ^^^^^^^  ^^""^  foregoing  evidence.  In  June, 
wants  "A  1 899,  he  introduced  into  Parliament  a 

General  Service"     gju^   ^j^j^j^^  ^^^^^^  ^^^^^  ^l^-^^^g^  ^^^^ 

upward  of  1,300  local  authorities  power  to  establish 
telephone  exchanges,  at  the  same  time  forbidding  the 
National   Telephone   Company   from  erecting  an   ex- 

^  Report  from  the  Select  Committee  on  Telephones,  1898  ;  q.  706, 
1054,  loss,  1837,  7838  and  7920  to  7922,  Mr.  J.  C.  Lamb,  Second 
Secretary  to  Post  Office. 

^  Report  from  the  Select  Committee  on  Telephones,  1898  ;  q.  2200. 
The  foregoing  statement  was  repeated  in  Hansard's  Parliamentary 
Debates,  March  6,  1899. 


THE  EVIDENCE  PRESENTED  213 

change  in  any  area  in  which  it  had  not  an  exchange  in 
operation  or  under  construction.  Mr.  Hanbury  used 
these  words :  "What  we  want  in  this  country  is  a  gen- 
eral service  which  will  extend  itself  over  the  whole 
country;  but  the  National  Telephone  Company  picked 
out  the  most  densely  populated  parts  of  the  country 
and  you  could  not  blame  them  for  that.  Being  a  private 
company  they  naturally  consulted  their  own  interests. 
....  If  the  company  is  not  working  already  in  the 
smaller  urban  districts,  those  districts  need  not  fear 
any  competition .  .  .  .  ;  they  will  be  absolutely  free  to 
start  a  system  of  their  own  without  fear  of  competi- 
tion from  the  National  Telephone  Company.  As  to 
the  smaller  districts,  is  it  the  fact  that  they  are  not  pay- 
ing districts  ?  The  experience  of  Norway  and  Sweden 
shows  that  they  are  paying  districts,  and  when  asked 
before  the  Select  Committee  of  last  year,  where,  if  he 
had  his  choice,  he  would  prefer  to  start  an  exchange, 
Mr.  Preece  [Engineer-in-Chief  to  Post  Office]  said  he 
would  choose  the  small  rural  districts.  .  .  ."^ 

In  1905,  when  the  policy  of  telephonic  service  by 
local  authorities  was  abandoned  as  a  complete  failure, 
not  a  single  rural  or  urban  district  had  established  a 
telephone  exchange.  Five  cities,  ranging  in  popula- 
tion from  90,000  to  1,000,000,  had  established  ex- 
changes. One  small  city  with  a  population  of  30,000, 
had  established  an  exchange,  had  become  discouraged 

*  Hansard's  Parliamentary  Debates;  June  24,  1899,  p.  139. 


214        THE   TELEPHONE   IN   GREAT   BRITAIN 

after  two  and  one-half  years'  operation  and  had  sold 
out  to  the  National  Telephone  Company. 

The  Post  Office  stepped  in  and  to  some  extent  filled 
the  void  created  by  forbidding  the  National  Telephone 
Company  entering  any  new  field,  but  the  Post  Office 
never  established  a  telephone  system  of  doubtful  finan- 
cial prospect  unless  the  persons  to  be  served  by  that 
system  had  guaranteed  the  Post  Office  an  income  suffi- 
cient to  pay  not  only  the  interest  upon  the  captial  in- 
vested but  also  sinking  fund  contributions  which  in  a 
comparatively  short  time  would  repay  the  entire  capi- 
tal investment.^ 

The  evidence  submitted  to  the  Select  Committee  is 
properly  summed  up  in  the  statement  that  if  the  Na- 
tional Telephone  Company  were  given 
Nummary  ,         ,  ,  , 

adequate   powers   of   way-leave;   were 

given  assurance  that  it  would  be  treated  reasonably  in 
191 1 ;  and  were  given  such  security  of  position  that  it 
could  go  counter  to  public  opinion  to  the  extent  of 
substituting  the  measured  service  for  the  unlimited 
user  service;  then  the  Company  would  give  a  service 
that  would  be  reasonable  in  price,  efficient  and  ade- 
quate, in  the  cities  and  towns  as  well  as  in  the  rural' 
districts. 


^Report  from  the  Select  Committee  on  Telephones,  i898;q.  S315, 
5065  to  5070  and  4925,  Mr.  W.  H.  Preece,  Engineer-in-Chief  to 
Post  Office;  and  Hansard's  Parliamentary  Debates;  August  3,  1899, 
p.  1247,  Lord  Harris;  and  June  21,  1906,  p.  392,  Mr.  S.  Buxton, 
Postmaster  General. 


CHAPTER  XIV 

THE  REPORT  OF   THE   SELECT   COMMITTEE,    1898 

The  Select  Committee  makes  a  Report  that  is  not  supported 
by  the  evidence  that  had  been  presented.  It  recommends  "im- 
mediate and  effective  competition  by  either  the  Post  Office  or  the 
local  authority"  though  there  is  grave  doubt  whether  Parliament 
and  the  Government  can  authorize  such  competition  without 
violating  "the  equity  of  the  understanding"  that  had  obtained 
between  the  Government  and  the  National  Telephone  Company 
at  the  time  of  the  so-called  purchase  of  the  long  distance  tele- 
phone wires,  in  the  year  1892. 

The  main  conclusion  of  the  Select  Committee  on 
Telephones,  1898,  was:  that  "general,  immediate  and 
effective  competition  by  either  the  Post  Office  or  the 
local  authority  is  necessary,"  and  "that  a  really  effi- 
cient Post  Office  service  affords  the  best  means  for 
securing  such  competition.  We  further  consider  that 
when  in  an  existing  area  in  which  there  is  an  [a  Na- 
tional Telephone  Company]  exchange,  the  local  au- 
thority demands  a  competing  service,  the  Post  Office 

either  ought  to  start  an  efficient  tele- 
Committee 
recommends  phone  system  itself,  or  grant  a  license 

Ail-round  to  the  local  authority  to  do  so.     With 

Competition  ,    ,  .  1  •  1     .1 

regard  to  areas  m  which  there  is  no 

exchange,  and  districts  which  are  not  [at  present,  tele- 
phone] areas,  we  think  some  provision  should  be  made 

215 


216        THE    TELEPHONE    IN   GREAT    BRITAIN 

beyond  what  is  now  offered  by  the  Telephone  Company 
for  giving  a  service  when  there  is  a  reasonable  local 
demand.  In  such  cases  the  Post  Office  should  either 
start  a  service  of  its  own,  or  should  grant  licenses  to 
the  local  authorities  to  do  so,  subject  to  proper  regula- 
tions. 

"Your  Committee  in  thus  recommending  a  Post 
Office  service  assume  that  it  vail  constitute  a  real  and 
active  competition,  and  that  concessions  to  the  Com- 
pany not  required  by  the  Agreement  [of  1892]  will 
cease.  Such  a  competition  should,  in  their  opinion,  be 
carried  on  by  a  distinct  and  separate  branch  of  the 
[Post  Office]  Department,  and  in  future  be  conducted 
under  strictly  businesslike  conditions,  and  by  a  staff 
specially  qualified  for  such  a  duty." 

This  conclusion  was  not  in  accord  with  the  trend  of 
the  evidence  submitted  to  the  Committee.  That 
evidence  had  been  that  if  the  National  Telephone  Com- 
pany were  given  adequate  way-leave  powers;  the  as- 
surance that  it  would  be  treated  reasonably  in   1911; 

„        .^   ,  and  such  security   of  position  that  it 

C  ommittee  s  -^  ^ 

Recommendation   could  go  Counter  to  public  opinion  to 

not  supported  by  the  extent  of  substituting  the  measured 
the  Evidence  . 

service  for  the  flat  rate ;  then  the  Com- 
pany would  give  a  service  that  would  be  reasonable  in 
price,  efficient  and  adequate,  in  the  cities  and  towns 
as  well  as  in  the  rural  districts. 

General  competition,  by  either  the  Post  Office  or 
local  authorities,  had  been  advocated  before  the  Com- 


REPORT  OF  SELECT  COMMITTEE,  1898        217 

mittee  only  by  two  persons  who,  in  1898,  might  pos- 
sibly have  been  deemed  entitled  to  an  opinion  on  that 

rr   ,■  t        subject.    Those  persons  were  Sir  Alex- 

Testimony  of  -^  *^ 

Sir  A.  Binnie        ander    Binnie,    who   was   Engineer-in- 
and  Mr.  Bennett   (^j^j^f  ^^  ^^^  London  County  Council, 

but  had  had  no  experience  in  building  or  operating 
telephone  exchanges;  and  Mr.  A.  R.  Bennett,  some- 
time in  the  employ  of  the  National  Telephone  Com- 
pany, and  more  recently  consulting  engineer  to  Glasgow 
and  other  local  authorities.  Those  witnesses'  recom- 
mendations of  general  competition  were  based  on 
estimates  of  the  cost  of  installing  telephone  exchanges 
which  subsequent  experience  proved  to  be  wrong. 
Those  witnesses'  estimates  were  controverted  by  the 
testimony  given  by  Mr.  Preece,  Engineer-in-Chief 
to  the  Post  Office,  before  the  Select  Committee 
of  1895,  which  Committee's  evidence  was  referred  to 
the  Committee  of  1898.  The  estimates  of  Mr.  Bennett, 
the  Commissioner  in  the  Glasgow  Inquiry  had  denomi- 
nated "opinion  and  advice  likely  to  be  more  theoretical 
than  practical,  at  all  events  as  regards  the  financing  of 
the  system."  The  evidence  taken  at  the  Glasgow  In- 
quiry also  had  been  referred  to  the  Committee  of  1898. 
The  Select  Committee  of  1898  endorsed  Mr.  Ben- 
nett's estimate,  saying:  "It  seems  clear  to  your  Com- 
mittee that  a  local  authority  should  be  able  to  construct 
a  system  at  a  price  below  that  which  from  various 
causes  the  Company  have  spent  upon  theirs,  and  this 
opinion  is  confirmed  by  the  fact  that  the  probable  cost 


218        THE    TELEPHONE    IN    GREAT    BRITAIN 

of  such  a  service  in  the  hands  of  the  Glasgow  Corpora- 
tion is  based  not  upon  estimates  alone  but  on  tenders 
actually  received."  Mr.  Bennett  estimated  at  about 
$95  per  subscriber  the  cost  of  supplying  Glasgow  with 
telephone  service.  In  May,  1906,  the  actual  cost  had 
been  $143  per  telephone  in  use,  and  $183  per  subscriber. 
The  Committee  supported  its  conclusion  that  "gen- 
eral, effective  and  immediate  competition"  was  neces- 
sary, in  part  by  the  statement  that  "the  Company, 
unlike  all  similar  monopolies,  has  power  to  charge 
what  rates  it  chooses ;  and  in  view  of  the  comparatively 
Possible  small  amount  already   [i.e.,   thus  far] 

Breach  of  Faith  placed  to  reserve,  and  the  short  period 
Suggested  ^^^  which   the   license   will   run,   it  is 

evident  that  in  order  to  recoup  its  great  expenditure, 
the  present  high  rates  of  the  Company  may  soon  be  still 
further  raised.  But  any  further  raising  of  the  rates,  .  .  . 
would  inevitably  produce  complaints,  from  all  sides,  of 
the  increased  dearness  of  a  service  which  becomes  daily 
more  vital  to  the  trading  interests  of  the  country,  and 
a  public  demand  might  in  consequence  arise  for  the 
Government  to  undertake  the  service  itself.  Unless 
the  Government  had  already  an  alternative  plant  avail- 
able, supplied  wholly  by  the  Post  Office  or  partly  by 
municipal  licensees,  the  purchase  of  the  Company's 
undertaking  at  an  inflated  price  might  thus  be  imposed 
upon  the  Government.  The  inducements  to  the  Company 
to  produce  such  a  result  are  obvious,  and  your  Commit- 
tee cannot  too  strongly  recommend  that  no  delay  should 


REPORT  OF  SELECT  COMMITTEE,  1898        219 

occur  in  taking  adequate  precautions  to  prevent  it. 
Mr.  Preece  informed  your  Committee  that  it  would 
probably  take  five  years  to  provide  such  an  alternative 
plant  for  the  whole  country." 

The  Committee  made  the  foregoing  argument, 
though  the  Chairman  of  the  National  Telephone  Com- 
pany had  repudiated  the  suggestion  that  the  Company 
would  raise  its  rates  after  1904,  saying  that  such  an 
action  would  be  a  breach  of  faith,  and  though  the 
Company  had  made  contracts  with  numerous  local 
authorities  not  to  raise  its  rates  at  any  time,  and  was 
ready  to  make  similar  contracts  with  any  and  every 
local  authority. 

Throughout,  the  Report  of  the  Select  Committee 
suggests  that  the  National  Telephone  Company  does 
exercise,  or  is  liable  to  exercise,  in  a  manner  contrary 
to  public  policy,  its  power  to  refuse  supply  and  to  give 
preferential  subscription  rates.  It  ignores  the  uncon- 
troverted  testimony  of  the  Chairman  of  the  National 
Telephone  Company  that  the  power  to  refuse  supply 
never  had  been  exercised  in  a  manner  contrary  either  to 
public  policy  or  to  the  spirit  of  the  law ;  as  well  as  the 
fact  that  the  power  to  give  preferential  rates  had  not 
been  exercised  for  some  years  past.  It  ignores  also  the 
fact  that  the  Company  had  contracted  with  numerous 
local  authorities  not  to  give  preferential  rates,  and  to 
assume  obligation  to  supply  all  applicants,  and  was 
ready  to  make  similar  contracts  with  any  and  every 
local  authority  that  would  give  it  underground  way- 
leaves. 


220        THE   TELEPHONE   TN   GREAT   BRITAIN 

The  Committee  indulged  in  hypothetical  and  specious 

arguments  to  the  effect  that  it  would  be  to  the  pecuniary 

advantage  of  the  company  to  pursue  certain  policies 

which  would  be  contrary  to  public  policy,  and  then 

suggested   that   the   Company   was    liable   actually  to 

adopt  those  policies.     Those  hypothetical  and  specious 

arguments  were  of  a  nature  to  commend  themselves  as 

^,  ^  .,,  ,  sound  to  the  person  who  had  not  ex- 
1  he  Lommittee  s  ^ 

Hypothetical  amined   minutely  the  voluminous  evi- 

Argumcnts  dence  taken  by  the  Committee  itself,  or 

referred  to  the  Committee  in  the  Reference.  And  it 
goes  without  saying  that  few  Members  of  Parliament, 
very  few  writers  for  the  newspaper  press,  and  practi- 
cally only  a  negligible  portion  of  the  general  public  had 
either  the  inclination  or  the  leisure  to  read  that  volu- 
minous testimony.  The  Committee,  therefore,  incurred 
little  risk  in  ignoring  the  fact  that  the  Company  had 
submitted  uncontroverted  testimony  to  the  effect  that 
the  hypothetical  reasoning  was  unsound  when  tested 
by  fact  and  experience,  that  is,  when  put  forth  as  any- 
thing more  than  an  ingenious  exercise  of  the  imagina- 
tion. The  Committee  also  was  safe  in  ignoring  the 
testimony  of  the  Company's  Chairman  and  General 
Manager,  that,  as  a  matter  of  expediency,  the  Com- 
pany would  not  dare  to  adopt  the  policies  suggested, 
even  if  those  policies  should  be  sound  in  fact. 

An  instance  of  the  foregoing  hypothetical  argu- 
ment and  insinuation,  most  damaging  to  the  Company, 
as  well  as  admirably  calculated  to  awaken  unfounded 


REPORT   OF  SELECT   COMMITTEE,   1898         221 

apprehension  in  the  public  mind,  is  found  in  the  Com- 
mittee's statement  that :  "Under  the  pecuHar  conditions 
(or  freedom  from  conditions)  of  its  license  the  Com- 
pany has  an  obvious  reason  for  limiting  the  number 
of  its  subscribers.  As  subscribers  upon  an  exchange 
increase,  the  cost  of  the  service  increases  so  much  that 
a  point  is  at  last  reached  at  which  an  increased  number 
of  subscribers  fails  to  repay  the  additional  cost.  The 
Company,  unlike  the  Post  Office  from  which  it  receives 
its  license,  has  power  to  refuse  service  and  thus  to  pick 
and  choose  its  subscribers  and  thereby  to  limit  their 
number,  and  in  doing  this  it  is  materially  assisted  by 
the  grant  of  extensive  areas,  which  afford  a  wide  choice 
of  the  most  remunerative  subscribers,  and  at  the  same 
time  go  far  to  protect  it  against  competition. 

"As  the  number  of  subscribers  on  an  exchange  is  thus 
restricted  the  number  of  exchanges  within  an  area  must 
in  consequence  be  increased.  The  cost  of  thus  sending 
a  message  through  two  or  three  exchanges  and  over 
the  junction  wires  has  of  course  to  be  paid  for  by  some- 
body, and  it  is  paid  for  in  the  disguised  form  of  a 
larger  annual  subscription.  Under  a  scheme  of  smaller 
areas  than  those  which  have  in  fact  been  allotted  to  the 
company,  the  wires  which  connect  such  exchanges 
would  in  most  instances  have  been  Government  trunk 
wires  directly  producing  a  revenue  to  the  Post  Office." 

The  charges  conveyed  in  the  foregoing  quotation, 
and  particularly  in  the  last  sentence,  are  in  direct  con- 
flict with  the  uncontroverted  testimony  of  Mr.  J.   C. 


222        THE   TELEPHONE   IN   GREAT   BRITAIN 

Lamb.  Second  Secretary  to  the  Post  Office,  who  had 
supervised  the  entire  demarcation  of  areas  from  1892 
to  1898.  Mr.  Lamb's  testimony  was  that  areas  had 
been  mapped  out  exclusively  on  the  twofold  principle 
that  only  such  places  must  be  grouped  in  one 
area  as  had  such  close  commercial  and  social  con- 
nections as  to  be  in  fact  one  place,  and  that  the 
Post  Office  trunk  wire  revenue  must  never  be  allowed 
to  suffer.  On  the  latter  point  Mr.  Lamb  testified 
that  Mr.  Kempe,  the  Treasury  Official  deputed 
to  safeguard  the  Treasury's  interest  in  the  trunk  wires, 
not  only  had  approved  the  principles  which  had  gov- 
erned Mr.  Lamb,  but  in  a  number  of  specific  instances 
had  expressed  a  willingness  to  go  further  than  Mr. 
Lamb  had  been  willing  to  go.  Mr.  Lamb  added  that 
if  the  Post  Office  had  insisted  on  restricting  the  Com- 
pany to  the  areas  of  the  towns  themselves,  to  the  ex- 
clusion of  small  outlying  places,  thus  compelling  the 
persons  in  such  outlying  places  to  pay  for  every  con- 
versation with  the  adjoining  town  the  minimum  trunk 
line  fee  of  6  cents  for  a  three  minutes'  conversation, 
the  effect  would  have  been  greatly  to  restrict  the  spread 
of  the  telephone,  and  thus  to  starve  the  trunk  line 
revenue  itself.  The  practice  of  including  in  one  large 
area  many  small  places,  or  large  and  small  places,  as 
carried  out  by  the  Post  Office  had  increased  the  trunk 
line  revenue.* 

^Report  from  the  H elect  Committee  on  Telephones,   1898;  q.  695 
to  700,  755  to  765,  291 1  and  following,  3025  to  3033,  8880  and  621. 


REPORT  OF  SELECT   COMMITTEE,  1898         223 

If  the  Select  Committee  on  Telephones,  1898,  had 
been  governed  by  the  evidence  submitted  to  it,  it  would 
have  reported  that  past  experience  showed  that  the 
National  Telephone  Company  was  a  public-spirited 
institution  which  obeyed  not  only  the  letter  but  also 
the  spirit  of  the  law.  But  that  the  Company  could  not 
give  as  extensive,  efficient  and  cheap  a  service  as  the 
then  state  of  telephony  warranted,  unless  the  Company 
were  given  adequate  rights  of  way  in  the  streets,  as- 
surance of  commercially  reasonable  treatment  in  1911, 
and  sufficient  independence  of  public  opinion  to  be  able 
to  substitute  the  measured  service  for  the  unlimited 
user  service.  But  the  Select  Committee  was  dominated 
by  its  Chairman,  Mr.  R.  W.  Hanbury,  who  had  back 
of  him  the  powerful  Association  of  Municipal  Corpora- 
tions. The  Committee's  Report  was  largely  a  restate- 
ment of  the  charges  which  Mr.  Hanbury  had  brought 
against  the  Company  in  Parliament  early  in  the  year 
1898. 

The  readiness  of  the  Select  Committee  of  1898  to 
recommend  "general,  immediate  and  effective  competi- 
tion by  either  the  Post  Office  or  the  local  authority," 
although  no  evidence  had  been  presented  that  the  Na- 

_.    „     .  tional  Company  had  failed  in  its  dutv 

The  Rectitude  ,  \  .         .         ' 

of  Inaugurating      ^s  a  public  Service  corporation,  is  the 

All-around  more  remarkable  since  there  was  grave 

Competition  .      ,  1      1  -1-.     i-  1 

doubt    whether    Parliament    was  alto- 
gether free  to  authorize  such  competition  in  the  absence 


224        THE   TELEPHONE   IN   GREAT   BRITAIN 

of  failure  of  duty  on  the  part  of  the  National  Telephone 
Company. 

In  1892,  when  the  Government  approached  the  Na- 
tional Telephone  Company  with  a  view  to  purchasing 
the  Company's  trunk  wires,  in  order  to  compensate 
the  Treasury  for  the  falling  off  in  the  revenue  of  the 
State  Telegraphs  caused  by  the  development  of  the 
practice  of  speaking  between  towns  by  means  of  the 
telephone,  the  National  Telephone  Company  was  in 
an  invulnerable  position,  so  far  as  the  possibility  of 
competition  by  companies  or  by  municipalities  was 
concerned.^  Unwillingness  to  give  up  that  position 
of  practical  exemption  from  the  possibility  of  competi- 
tion from  any  one  short  of  the  State  itself,  made  the 
National  Telephone  Company  remain  to  the  end  an 
unwilling  party  to  the  sale  of  the  trunk  lines.  The 
Company's  apprehensions  were  in  a  measure  allayed  by 
the  speech  made  in  the  House  of  Commons  on  March 
29,  1892,  by  the  Chancellor  of  the  Exchequer,  Mr. 
Goschen,^  in  reply  to  the  Motion  of  Dr.  Cameron, 
[Glasgow],  that  the  State  should  take  into  its  hands 
Mr  Goschen's  ^'^^  whole  telephone  service,  trunk  lines 
Declaration  of  as  well  as  local  exchanges.  Upon  that 
^"^"^^  occasion   Mr.   Goschen  said  that  if  it 

possibly  could  be  avoided,  the  Government  was  not 
prepared  either  to  buy  the  Company's  local  plants,  or  to 
compete  with  the  Company  in  the  local  telephone  busi- 

^Hansard's  Parliamentary  Debates;  March   29,   1892,  p.   194,  Mr. 
Goschen,  Chancellor  of  the  Exchequer. 

^Hansard's  Parliamentary  Debates;  March  29,  1892,  p.  194. 


REPORT  OF  SELECT  COMMITTEE,  1898         225 

ness.  Either  proposal  in  fact  meant  the  purchase  of  the 
National  Telephone  Company's  local  plants,  for  in  as 
much  as  the  National  Telephone  Company  could  not 
survive  competition  with  the  State,  it  would  be  neces- 
sary to  compensate  it  for  the  loss  of  its  business  con- 
sequent upon  State  competition.  Mr.  Goschen  said 
it  would  be  "against  the  spirit  of  the  license"  of  the 
National  Telephone  Company,  if  the  Government 
"were  to  take  the  local  arrangements  [businesses]  en- 
tirely into  its  hands  [by  means  of  competition]  during 
the  continuance  of  that  license,  to  the  detriment  of 
those  who  on  the  faith  of  that  license  have  been  extend- 
ing their  system  up  to  the  present  moment."  On  the 
other  hand,  deference  to  public  opinion  compelled  the 
Government  to  submit  a  scheme  for  destroying  the 
practical  monopoly  which  the  National  Telephone 
Company  held  by  virtue  of  its  trunk  lines.  A  local 
telephone  exchange  that  had  not  access  to  all  other 
local  exchanges,  by  means  of  the  trunk  wires,  would 
be  "only  half  useful,"  and  therefore  no  local  exchanges 
could  be  established  in  competition  with  the  National 
Telephone  Company's  local  exchanges.  Therefore  the 
Government  proposed  to  establish,  "in  one  sense,"  "free 
trade"^  in  the  local  telephone  business,  by  acquiring 
the  trunk  lines  and  throwing  them  open  to  all  local 
companies.  The  Government  proposed  also  that  the 
local  authorities  should  exercise  supervision  over  the 
telephone  business  in  the  local  areas,  and  should  apply 

'That  is  competition. 
15 


22(>         THE   TELEPHONE   IN   GREAT    BRITAIN 

to  the  Postmaster  General  for  relief  from  unsatisfactory 
service  in  the  local  areas.  The  Government  had  power 
to  afiford  relief,  for  it  had  full  power  to  authorize  com- 
petition in  any  form  or  any  place.  That  policy  would 
combine  "the  simplicity  of  Government  control  with 
the  expansion  which  we  may  expect  from  private  enter- 
prise." Mr.  Goschen's  words  were,  in  part,  as  follows : 
"The  attitude  we  should  take  up  toward  the  Local  Au- 
thorities will  ensure  that  when  we  are  assured  that  a 
town  is  badly  served,  competition  should  be  introduced 
by  another  company,  but  where  a  town  is  sufficiently 
served  there  should  not  be  all  the  inconvenience  of 
multiplying  wires,  taking  up  the  streets,  and  useless  ma- 
chinery which  is  inevitably  attendant  on  the  establish- 
ment of  competing  companies.  It  has  been  suggested 
during  the  course  of  this  discussion  that  the  Local  Au- 
thorities might  be  willing  to  undertake  the  telephone 
business  themselves.  I  see  nothing  contrary  to  the 
Government  policy  in  such  a  proposal.  If  in  any  par- 
ticular town  the  telephone  system  is  not  established, 
there  is  no  reason  why  they  should  not  undertake  it, 
and  communication  be  established  with  the  rest  of  the 
country  through  the  trunk  lines  which  would  be  in  the 
hands  of  the  State."  In  conclusion  Mr.  Goschen  said : 
"I  hope  the  House  will  consider  these  fair  terms, 
and  I  venture  to  hope  that  they  will  not  pronounce 
against  the  Government  in  the  sense  of  asking  that  the 
Government  should  take  over  the  whole  of  this  under- 
taking.    We  have  gone  a  long  way  in  this  direction, 


REPOR'l"  OF  SELECT  COAHMiril- IC,   iH9<^        227 

and  we  have  confidence  that  we  shall  be  able  to  work 
this  system  with  great  elasticity,  though  I  am  fearful 
as  to  the  effect  of  the  telephone  on  the  telegraph 
revenue."^ 

Upon  careful  reading  of  the  foregoing  statement, 
the  reader  will  find  that  the  Government's  policy  was 
to  leave  in  the  hands  of  the  National  Telephone  Com- 
pany the  business  of  supplying  local  telephone  services, 
holding  over  the  Company  the  possibility  of  competi- 
tion should  the  Company  neglect  its  duties  to  the  public 
or  abuse  its  monopoly  position.  Potential  competition 
was  to  be  established,  not  actual,  all-round  competition. 
"Free-trade,"  that  is,  competition,  was  to  be  established 
"in  a  sense,"  were  Mr.  Goschen's  words.  To  the 
London  Economist ,-  Mr.  Goschen's  statement  conveyed 
the  meaning  that  the  Government  proposed  to  enter 
into  a  "co-partnership"  with  the  National  Telephone 
Company. 

On  the  following  May  23rd,  the  Government  issued 
a  Treasury  Minute  enunciating  its  policy  with  regard 
to  the  telephone.  Among  the  other  things,  that  docu- 
ment said :  "As  to  fresh  licenses,  no  further  licenses 
for  the  whole  country  will  be  granted,  and  even  for  a 
license  to  establish  an  exchange  in  a  particular  town, 
nc  application  will  be  entertained  unless  a  formal  resolu- 
tion in  its  favor  has  been  passed  by  the  corporation,  or 

'^Hansard's  Parliamenlary  Debates;  March  29,  1892;  The  Times; 
March  30,  1892;  and  Report  from  the  Select  Committee  on  Tele- 
phones. 1898;  q.  974  to  985,  Mr.  J.  C.  Lamb,  Second  Secretary  tn 
Post  Office. 

*  April  2,  June  4  and  July  30,   1892. 


228        THE   TELEPHONE   IN   GREAT   BRITAIN 

Other  municipal  authority,  and  evidence  given  that 
there  is  sufficient  capital  subscribed  to  carry  out  the 
undertaking.  In  this  way  competition  will  not  be  ex- 
cluded, but  a  check  will  be  imposed  on  the  formation  of 
companies  whose  sole  object  it  is  to  force  the  existing 
licensees  to  buy  them  up.  But  although  this  is  the 
policy  which  commends  itself  to  Her  Majesty's  Gov- 
ernment, it  must  be  distinctly  understood  that,  should 
licenses  hereafter  be  granted  on  other  principles,  no 
company,  now  or  hereafter  to  be  licensed  will  have  any 
ground  to  complain  of  breach  of  contract  or  want  of 
good  faith  on  the  part  of  the  Postmaster  General." 

Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office, 
practically  drafted  the  foregoing  Minute;  and  was 
present  at  all  of  the  interviews  between  Mr.  Goschen 
and  the  representatives  of  the  National  Telephone  Com- 
pany. Before  the  Select  Committee  of  1898,  Mr.  Lamb 
said :  "This  leads  me  to  say  that  the  National  Tele- 
phone Company  are  more  than  licensees  of  the  Post- 
master General.  It  is  entirely  erroneous  to  say  that 
the  Company  are  mere  licensees.  Under  the  original 
license  the  Company  were  only  licensees  of  the  Post- 
master General,  and  the  Post  Office  stood,  cap  in  hand, 
merely  to  take  a  tax ;  but  now  the  Post  Office  has  en- 
tered into  a  working  agreement  with  the  Company,  and 
that  is  a  very  important  matter.  The  Company  are  no 
longer  its  licensees,  but  a  working  agreement  has  been 
entered  into,  and  in  that  working  agreement  provisions 
are  made  for  the  cooperation  and  alliance,  and  har- 


REPORT  OF  SELECT   COMMITTEE,  1898        229 

monious  working  which  were  mentioned  both  by 
Ministers  in  the  debates  in  ParHament  and  in  the 
Treasury  Minute.^ 

In  June,  1892,  the  National  Telephone  Company 
asked  the  Government  to  grant  the  following  con- 
cession:  "The  Post  Office  will  not  grant  further 
licenses  in  any  area  in  which  there  is  at  the  time  an 
existing  exchange,  nor  will  they  open  an  exchange  in 
competition  with  their  licensees  unless  on  complaint 
from,  say,  one-fourth  of  the  existing  subscribers,  or 
from  the  local  authority,  as  to  the  unsatisfactory  char- 
acter of  the  existing  service.  On  such  complaint  being 
made,  a  local  inquiry  to  be  held  by  an  independent 
person  appointed  by  the  Post  Office,  and  if  the  com- 
plaints are  held  to  be  well  founded,  the  existing  licensees 
tc  be  entitled  to  reasonable  opportunity  of  improving 
the  service  and  removing  the  cause  of  complaint,  and 
only  after  failure  to  do  this  is  an  additional  license 
tc  be  granted.  In  the  event  of  the  Post  Office  opening 
an  exchange  of  its  own  in  competition  with  the  com- 
pany, the  royalty  payable  by  the  company  in  that  area 
to  cease."-  The  Government  rejected  this  request; 
declining  to  limit  its  discretion  in  any  way.  Subse- 
quently to  this  refusal  the  National  Telephone  Com- 
pany initialled  the  Agreement,  in  August,  1892.  In 
February,  1893,  the  National  Telephone  Company  made 

^Report  from  the  Select  Committee  on  Telephones.  1898;  q.  557 
and  7807  to  7810. 

•Report  from  the  Select  Committee  on  Telegraphs  Bill.  1892: 
p.  22,  Mr.  J.   S.   Forbes,  Chairman   National  Telephone  Company. 


230         THE   TELEPHONE    IN   GREAT    BRITAIN 

a  further  effort  to  get  the  Post  Ofiice  to  limit  its  power 
to  grant  additional  licenses,  or  to  establish  additional 
Post  Office  exchanges;  it  having  come  to  the  knowl- 
edge of  the  Company  that  "a  feeling  was  springing  up 
in  certain  of  the  great  towns  in  favor  of  the  municipali- 
zation of  the  telephone  service."  The  Company  wrote 
the  Post  Office  as  follows :  .  .  .  .  "Whilst  the  Company 
recognize  that  the  Postmaster  General  cannot  in  the 
public  interest  come  under  a  contract  which  would 
place  this  Company  in  the  position  of  absolute  mon- 
opolists during  the  currency  of  the  license,  it  is  sug- 
gested that,  before  any  other  license  is  granted,  or  any 
further  exchange  is  opened  by  the  Department  itself, 
good  and  sufficient  reason  should  be  shown — (a)  that 
the  Company  has  not  already  provided  the  service  in 
the  area  in  question,  and  is  unwilling  to  do  so;  (b) 
that  the  service  provided  is  bad  and  inef^cient,  and  that 
the  Company  is  not  ready  and  willing  to,  or  does  not, 
improve  it.  With  this  expression  of  the  views  of  the 
Company,  I  am  now  instructed  to  offer  the  following 
suggestion  as  to  a  solution  of  the  questions  which  have 
recently  been  raised,  z'ia.,  that  it  be  made  a  condition 
01  the  agreement  that  before  any  new  license  is  granted, 
or  before  any  new  exchange  is  opened  by  the  Post 
Office,  in  any  area  in  which  the  Post  Office  has  not  at 
present  an  exchange,  the  Company  shall  have  an  oppor- 
tunity of  being  and  shall  be  entitled  to  be  heard  by  the 
Postmaster  General,  and  I  am  further  instructed  to  say 
that,  in  making  this  suggestion,  it  is  not  intended  that 


REPORT   OF  SELFXT   COMMITTEE,   1808         2:51 

the  absolute  discretion  of  the  Postmaster  General  to 
grant  any  license,  or  to  himself  open  any  exchange,  is 
to  be  in  the  slightest  degree  fettered  or  interfered  with. 
The  Company,  on  the  contrary,  if  given  the  oppor- 
tunity of  being  heard,  are  prepared  to  rely  upon  his 
fairness  and  impartiality,  and  to  abide  loyally  by  his 
decision."  The  Post  Office  replied  that  it  was  unable 
to  accept  the  suggestion  ;  but  that  while  the  Postmaster 
General  "must  preserve  intact  the  freedom  of  the  de- 
partment, he  does  not  wish  it  to  be  inferred  that  he 
would  deny  himself  the  advantage  of  communicating 
with  the  Company  on  occasions  when,  in  his  opinion, 
it  would  be  advantageous  to  obtain  a  statement  of  their 
views.  "^ 

The  failure  of  the  National  Telephone  Company  to 
obtain  any  written  concession  whatever  in  the  fore- 
going matter,  was  the  reason  why  the  Company  to  the 
end  remained  an  unwilling  party"  to  the  transaction 
commonly  denominated  the  purchase  by  the  Govern- 
ment of  the  Company's  trunk  lines. 

Before  the  Select  Committee  of  1898,  Mr.  J.  S. 
Forbes,  Chairman  National  Telephone  Company,  testi- 
fied that  the  Company,  upon  his  advice,  consented  to 
the  sale  of  its  trunk  lines,  solely  upon  the  declaration 
of  policy  made  in  the  House  of  Commons  on  March  29, 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  8596 
and  following,  and  8684  to  8686,  Mr.  J.  C.  Lamb,  Second  Secretary 
to   Post   Office. 

•Report  from  the  Select  Committee  on  Telephones,  1898;  q.  610 
to  613,  and  892  to  899,  Mr.  J.  C.  Lamb,  Second  Secretary  to  Post 
Office. 


232        THE   TELEPHONE   IN   GREAT   BRITAIN 

Mr.  Forbes'  1^92,  by  Mr.  G.  J.  Goschen,  Chancellor 

Contention  of  the  Exchequer,  said  declaration  of 

policy  having-  been  confirmed  in  several  interviews 
which  he,  Mr.  Forbes,  had  had  with  Mr.  Goschen  and 
the  Postmaster  General,  Sir  James  Fergusson.  He 
said:  "Well,  Mr.  Goschen  made  that  speech  (and  he 
improved  that  speech  very  much  after  [by]  correction 
in  [for]  Hansard's)  which  distinctly  shows  that  the 
theory  of  license  outside  the  Telephone  Company,  al- 
though the  license  was  left  to  the  discretion  of  the  Post 
Office  (an  absolute  discretion),  was  to  be  applied  only 
in  certain  specific  cases,  to  wit :  if  the  Telephone  Com- 
pany are  not  in  any  [particular]  area,  and  people  in  that 
area  want  telephonic  communication,  if  the  Telephone 
Company  do  not  supply,  it  will  be  competent  for  the 
Postmaster  General  himself  to  supply  it,  or  to  license 
somebody  to  supply  it.  That  is  No.  i.  No  2  was  :  The 
Postmaster  General  will  not  g"ive  licenses  to  areas  in 
which  the  Company  are  already  established  if  they  con- 
duct their  business  with  reasonable  efficiency. ...  I  think 
it  is  very  right  to  read  this  [Hansard  as  distinguished 
from  The  Times]  edition  of  the  Chancellor  of  the  Ex- 
chequer's speech  in  the  House  of  Commons,  revised 
by  himself,  and  see  what  it  conveys  to  any  reasonable 
mind;  and  what  it  conveys  to  any  reasonable  mind 
1  had  his  personal  assurance  about.  ...  I  ask  any  hon- 
orable man,  any  man  who  would  be  in  the  position  of  an 
arbitrator  to  determine  a  question  of  this  sort,  what 
value  he  would  attach  to  a  public  declaration  by   [the 


REPORT  OF  SELFXT  COMMriTEE,   1898         233 

Ministerial  Head  of]  a  department  when  it  was  initiat- 
ing a  new  policy;  and  when  I  tell  you  (as  I  do)  that  it 
was  only  on  his  confirming  those  declarations  that  there 
would  be  no  competition,  and  that  we  were  to  cooperate, 
that  I  entered  into  the  bargain."  Mr.  Forbes'  position 
was  that  he  would  not  say  it  would  be  a  "breach  of 
faith"  to  inaugurate  the  policy  of  the  unrestricted  issue 
of  telephone  licenses  to  municipalities,  but  that  such  a 
policy  would  be  "not  in  consistency  with  the  equity  of 
that  understanding"  reached  in   1892.^ 

With  Mr.  Forbes'  statement  that  he  had  had  "private 
assurances"  from  Mr.  Goschen,  we  must  compare  the 
statement  made  in  the  House  of  Commons  on  March  i , 
1895,  by  Mr.  Goschen.  Upon  that  occasion  Mr. 
Goschen  said  that  in  his  capacity  as  Chancellor  of  the 
Exchequer  he  had  been  present  at  many  of  the  negotia- 
tions between  the  Post  Office  and  the  National  Tele- 
phone Company,  and  that  the  representatives  of  the 
Government  on  all  those  occasions  had  taken  care  "that 
in  no  single  respect  should  the  rights  of  the  Govern- 
ment be  interfered  with,  or  the  possibility  of  competi- 
tion, when  necessary,  lost.  ..."  There  had  been  no 
"private  promises  to  the  Company  that  the  Government 
could  not  grant  licenses  if  it  wished."" 

Before  the  Select  Committee  of  1898  Mr.  Goschen 
stated  that  it  would  have  been  impossible  for  him  "to 
lock  up  the  discretion  of  the  Treasury"  in  any  of  the 

'^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  6140, 
6141,  6175,  6299,  6287   et  passim. 

^Hansard's  Parliamentary  Debates;  March   i,  1895,  p.  229. 


2:H        the   telephone    in   great   BRITAIN 

iiitcivicws  between  himself  and  Mr.  Forbes  in  1892. 
Thereupon  the  Chairman  of  the  Committee,  Mr.  R.  W. 
Ilanbury,  queried :  "And,  therefore,  if  the  Agreement 
left  it  entirely  free  for  the  Postmaster  General  to  start 
competition  in  his  own  discretion,  there  was  nothing 
said  in  any  interview  between  you  and  Mr.  Forbes 
which  would  prevent  the  Postmaster  General  from 
exercising  his  discretion  to  the  fullest  extent?"  Mr. 
Goschen  replied  :  "Well,  that  is  going  rather  far,  I  think, 
Mr.  Forbes  refers  to  my  speech  of  the  29th  March, 
1892,  I  will  read  this  passage  to  the  Committee  (which 
has  been  before  it  before)  in  my  speech,  which  I  think 
probably  states  my  policy  more  clearly  than  anything 
I  could  remember,  because  that  w^as  my  intention  at  that 
time.  I  say :  'Therefore  the  licensees  have  been  warned 
that  the  Government  retained  the  power  in  their  hands. 
He  thought  that  it  would  be  evasive  of  the  spirit  of  the 
license  if  during  the  continuance  of  the  license  they 
took  the  whole  of  the  telephonic  arrangements  into 
their  hands,  to  the  detriment  of  those  wdio  on  the  faith 
of  the  licenses  had  been  extending  the  system  up  to  the 
present  moment;'  and  my  recollection  and  my  inter- 
pretation of  that  would  be  that  if  we  had,  immediately 
after  the  Agreement  had  been  signed,  exercised  our  dis- 
cretion by  entering  into  competition  throughout  the 
country,  that  would  be  against  the  spirit  and  against 
the  policy  which  we  intended.  On  the  other  hand,  our 
discretion  is  not  tied  in  any  way.  The  answer  that  I 
give  is  in  reply  to  what  you  suggest ;   I  do  not  wish  it 


i 


REPORT  OF  SFXECT  COMMT  ITRF.,   iSuS         235 

to  be  pushed  too  far;  the  Post  Office  must  retain  their 
entire  discretion,  and  I  do  not  think  it  would  be  against 
that  discretion  to  raise  such  competition  in  the  course 
of  time  as  was  clearly  contemplated,  I  take  it,  both  in 
(he  Agreement  and  in  the  Treasury  Minute.  But  I 
think  it  would  have  been  a  surprise  to  the  Company  and 
that  they  would  have  considered  it  hard  usage  if  the 
moment  we  got  this  Agreement  signed  we  had  estab- 
lished competition  against  them  in  every  direction." 
"That  is  immediately?"  "Yes,  immediately."  "That 
would  mean  taking  the  whole  of  the  local  exchanges 
into  the  hands  of  the  Post  Office?"  "Yes."  "But 
would  that  have  prevented  competition  in  any  particu- 
lar locality?"  "I  should  say  not."  "Then  you  con- 
sider that  it  would  not  be  fair  to  extend  the  principle, 
which  you  had  applied,  to  a  certain  extent,  by  taking 
over  the  trunk  wire,  to  the  whole  of  the  local  ex- 
changes?" "Yes,  I  presume  that  was  the  meaning." 
Shortly  afterward  Mr.  Cawley  queried :  "I  only  want 
just  to  put  it  in  this  way :  you  would  have  thought  that 
had  you  used  the  trunk  lines  to  immediately  start  com- 
petition by  the  Post  Office  all  over  the  country  you 
would  have  been  guilty  then  of  being  a  little  sharp?" 
"Sharp ;  that  is  the  word,  yes."  To  the  further  query  : 
"And  nothing  else;  nothing  further?"  Mr.  Goschen 
replied  :  "No,  I  must  be  perfectly  candid  in  that  way ; 
I  think  they  would  have  had  cause  to  complain  if  we 
had  done  so  without  having  warned  them  beforehand, 
that  that  is  what  we  should  do.    It  was  not  our  policy 


236        THE   TELEPHONE    IN   GREAT   BRITAIN 

at  the  time  to  take  these  immediate  steps;  I  want  to  be 
quite  candid  with  the  Committee  so  far  as  my  memory 
goes."^ 

The  foregoing  documentary  evidence  shows  very 
clearly  that  the  Government  persistently  refused  to  give 
the  National  Telephone  Company  any  statutory  con- 
cession, or  even  any  written  or  spoken  concession  which 
would  have  curtailed  in  any  way  the  legal  power  of 
Parliament  to  adopt  at  any  time  any  telephone  policy 
that  it  might  wish  to  adopt.  But  it  shows  equally 
clearly  that  neither  the  Government  nor  Parliament 
could  in  good  faith  have  followed  up  the  getting  pos- 
session of  the  Company's  trunk  lines  by  inaugurating 
immediately  all-round  competition  with  the  Company, 
either  by  granting  a  telephone  license  to  every  munici- 
pality that  might  apply  for  one,  or  by  establishing 
everywhere  local  Post  Office  telephone  exchanges.  The 
question  therefore  arises  whether  Parliament  and  the 
Government  were  free  to  do  in  1898  what  they  were 
not  free  to  do  in  1892,  the  National  Telephone  Com- 
pany having  been  guilty  of  no  failure  of  duty  or  viola- 
tion of  power  in  the  period  from  1892  to  1898.  To 
the  writer  it  seems  perfectly  clear  that  there  can  be  only 
one  answer  to  that  question,  and  that  that  answer  is 
that  neither  Parliament  nor  the  Government  were  free 
to  inaugurate  general  competition  in  1898. 

The  Select  Committee  reported  that  the  Post  Office 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  7210 
to  7228. 


REPORT  OF  SELECT  COMMITTEE,  1898         237 

was  not  prevented  "either  by  legal  agreement  or  by  good 
faith  from  limiting  or  ending  the  monopoly  of  the 
Company."  The  Committee,  in  arguing  this  question, 
contented  itself  with  quoting  only  one  of  the  answers 
given  by  the  most  important  witness,  namely :  Mr. 
Goschen.  Sir  James  Woodhouse,  a  prominent  Parlia- 
mentary champion  of  the  demands  made  upon  Parlia- 
ment from  time  to  time  by  the  Association  of 
Municipal  Corporations,  put  the  last  question  that  was 
addressed  to  Mr.  Goschen.  It  was :  "I  should  like  to 
put  the  same  question  to  you  as  I  put  to  Mr.  Forbes : 
Would  the  granting  by  the  Post  Office  of  a  license  to  a 
municipality  now  be  in  your  opinion  an  evasion  of  the 
spirit  of  the  Agreement  entered  into  with  the  National 
Telephone  Company?"  Mr.  Goschen's  answer  was: 
"1  cannot  think  that  it  would ;  I  think  there  are  words 
which  distinctly  contemplate  it  in  the  very  speech  to 
which  attention  is  called."  It  is  clear  that  the  question 
whether  the  Post  Office  was  free  to  grant  a  license  to 
a  municipality  was  a  question  very  different  from  the 
question  at  issue,  namely,  whether  the  Post  Office  was 
free  to  offer  to  grant  licenses  to  every  one  of  the  1334 
local  authorities  in  the  United  Kingdom.  Therefore 
Mr.  Goschen's  answer  to  Sir  James  Woodhouse's  ques- 
tion detracted  nothing  from,  and  was  in  no  way  incon- 
sistent with  Mr.  Goschen's  leading  statement,  to-wit, 
that  the  Post  Office  was  free  to  inaugurate  "such 
competition  in  the  course  of  time  as  was  clearly  con- 
templated, I  take  it,  both  in  the  Agreement  and  in  the 


23S        THE    TELEPHONE    IN    GREAT    BRITAIN 

Treasury  Minute.  But  I  think  it  would  have  been  a 
surprise  to  the  Company  and  that  they  would  have  con- 
sidered it  hard  usage  if  the  moment  we  got  this  Agree- 
ment signed  we  had  established  competition  against 
them  in  every  direction."  Nor  was  Mr.  Goschen's 
answer  to  Sir  James  Woodhouse  in  any  way  inconsis- 
tent with  his  previous  reply  to  the  Chairman  of  the 
Committee  that  it  was  "going  rather  far"  to  infer  from 
the  fact  that  "the  Agreement  left  it  entirely  free  for  the 
Postmaster  General  to  start  competition  in  his  own  dis- 
cretion," that  there  was  nothing  said  in  any  of  the 
interviews  between  [him]  and  Mr.  Forbes  which  would 
prevent  the  Postmaster  General  from  exercising  his 
discretion  to  the  fullest  extent. 

The  Conservative  Salisbury  Ministry  accepted  the 
Report  of  the  Select  Committee  of  1898.  That  fact 
is  the  more  remarkable  since  the  Conservative  Party, 
under  the  leadership  of  the  Alarquis  of  Salisbury,  had 
enacted  the  legislation  of  1892.  In  1905.  another 
Conservative  Ministry,  that  of  Mr.  A.  J.  Balfour,  re- 
pealed the  legislation  which  was  enacted  in  1899  in 
consequence  of  the  Select  Committee  Report  of  1898. 
In  the  meantime,  however,  the  Report  of  1898  and  the 
legislation  of  1899,  had  knocked  25  per  cent,  off  the 
market  value  of  the  National  Telephone  Company's 
securities. 


CHAPTER  XV 

PARLIAMENT    AUTHORIZES    ALL-ROUND    COMPETI- 
TION WITH  THE  NATIONAL  TELEPHONE 
COMPANY 

Mr.  R.  W.  Hanbury,  Financial  Secretary  and  Representative 
of  the  Postmaster  General,  speaks  of  the  National  Telephone 
Company  as  if  it  were  a  public  enemy,  if  not  a  criminal.  The 
Telegraph  Act,  1899,  authorizes  unfair  competition  with  the  Na- 
tional Telephone  Company.  It  knocks  fully  25  per  cent,  off  the 
market  value  of  the  National  Telephone  Company's  securities ;  and 
it  makes  Mr.  Hanbury  a  Member  of  the  Cabinet.  In  all  other 
respects  it  is  an  utter  failure.  It  is  partially  abandoned  in  igoi, 
and  completely  abandoned  in  1905.  The  reason  for  the  complete 
failure  of  the  Telegraph  Act,  1899,  is  the  conservatism  of  the 
local  authorities,  and  the  inability  of  adjoining  local  authorities 
to  cooperate. 

Shortly  after  the  Select  Committee  of  1898  had 
reported,  the  Government  announced  that  it  was  ready 
to  grant  telephone  licenses  to  any  local  authority ;  but 
that  legislation  would  be  required  to  authorize  local 
authorities  to  raise  money  on  the  security  of  the  taxes 
for  the  purpose  of  building  telephone  plants.  Early 
^7,         ,  in  March,    1800,  the  House  of  Com- 

Competition  mons,   at  the   request  of  the   Govern- 

Authonzcd  mtni,   instructed   the   Financial   Secre- 

tary   of    the    Treasury    and    the    Chancellor    of    the 
Exchequer  to  bring  in  a  Bill  "to  enable  local  authori- 

239 


240        THE   TELEPHONE    IN    GREAT    BRITAIN 

ties  to  raise  or  apply  money  for  telephonic  purposes," 
and  "to  authorize  the  issue  out  of  the  Consolidated  Fund 
of  a  sum  not  exceeding  $10,000,000  for  making  fur- 
ther provision  for  the  improvement  of  telephonic  com- 
munication." One-half  of  the  aforesaid  sum  the  Post 
Office  was  to  spend  in  establishing  a  telephone  plant  in 
Metropolitan  London,  said  plant  to  compete  actively 
with  the  National  Telephone  Company.  The  other 
half  the  Post  Office  was  to  use  partly  for  the  purpose 
of  competing  actively  with  the  Company  in  those  pro- 
vincial places  in  which  the  Post  Office  had  been  main- 
taining moribund  telephone  exchanges,  partly  for  the 
purpose  of  establishing  Post  Office  telephone  exchanges 
in  those  districts  which  were  not  sufficiently  populous 
to  maintain  independent  local  plants.^  The  speech 
made  by  Mr.  Hanbury  in  moving  the  First  Reading 
Mr.  Hanbury's  °^  ^^^^  Telegraph  Bill,  led  Sir  James 
First  Reading  Fergusson,  a  Director  of  the  National 
Speech  Telephone   Company   since    1896,   and 

Postmaster  General  in  1891-92,  to  reply  as  follows: 
"The  Right  Honorable  Gentleman  has  treated  the  Na- 
tional Telephone  Company  as  a  criminal  to  some  extent, 
and  as  an  enemy  of  the  public,  and  especially  of  the 
Post  Office.  From  the  time  that  the  Agreement  was 
obtained  in  1892,  and  especially  since  it  was  completed 
in  1896,  until  the  Right  Honorable  Gentleman  himself 
took  office,  the  Post  Office  and  the  National  Telephone 

*  Hansard's  Parliamentary  Debates ;  Mr.  Hanbury,  March  6,  June 
20,  and  July  24,  1899;  and  the  Duke  of  Norfolk,  Postmaster  General, 
August  3,    1899. 


ALL-ROUND   COMPETITION    AUTHORIZED      241 

Company  had  been  in  the  most  complete  harmony ; 
they  had  been  'cooperating  together'  in  the  words  of 
the  Treasury  Minute,  and  there  had  been  no  sort  of 
difference  between  them.  The  National  Telephone 
Company  sometimes  thought  that  the  Post  Office  was 
hard  upon  them,  but  no  allegation  was  made  on  the 
part  of  the  Post  Office  that  the  National  Telephone 
Company  was  not  doing  its  duty.  And,  in  fact,  before 
the  Committee  of  1895,  the  scientific  advisers  of  the 
Postmaster  General  told  the  Committee  that  the  Com- 
pany was  doing  its  work  extremely  well,  that  the  sys- 
tem was  the  very  best  that  could  be  introduced,  and 
that  they  were  pushing  the  business  as  fast  as  they 
could ....  I  should  be  ashamed  to  belong  to  any  Com- 
pany against  which  any  just  charges  of  unfair  dealing 
could  be  brought;  but  the  National  Telephone  Com- 
pany, which  has  the  greatest  ability  at  its  command, 
has  endeavored  to  make  the  telephone  system  of  this 
country  as  good  as  possible,  and  I  am  only  sorry  that  a 
Minister  should  treat  it  with  the  hostility  which  the 
Right  Honorable  Gentleman  has  shown. "^ 

On  June  20,  Mr.  Hanbury  moved  the  Second  Read- 
ing of  the  Telegraph  Bill.  He  began  his  speech  with 
Mr.  Hanbury's  ^^'^  statement  that  the  National  Tele- 
Second  Reading  phone  Company  again^  had  lodged  a 
Speech  -gjjj  ^gking  for  way-leaves.     He  added 

that  he  was  convinced  the  House  was  not  prepared  to 

^Hansard's  Parliamentary  Debates;  March  6,   1899,  p.  1393. 
^  That    is,    for    the    sixth    time.     The    previous    bills    had    been 
lodged  in  1884,   1885,  1888,  1892  and   1893. 

16 


242        THE   TELEPHONE   IN   GREAT   BRITAIN 

grant  them.  In  support  of  his  opinion  he  cited  reso- 
lutions recently  passed  by  the  Association  of  Municipal 
Corporations  and  the  London  County  Council,  request- 
ing Members  of  Parliament  to  oppose  any  grant  of 
power  to  the  National  Telephone  Company.  On  the 
other  hand,  he  said,  it  was  clear  that  the  public  must 
have  better  and  more  extensive  telephone  facilities. 
Therefore  either  the  Post  Ofifice  or  the  local  authorities, 
supplemented  by  small  local  companies,  must  take  up 
the  work  of  supplying  telephone  service.  He  added 
tliat  it  was  quite  possible  that  the  local  authorities, 
though  unwilling  "to  grant  way-leaves  to  a  rich  and 
powerful  company,  might  be  willing  to  grant  them  to 
small  companies  over  which  they  would  have  more 
control."^  The  first  of  those  two  remedies  was  out 
of  the  question,  for  two  reasons.  In  the  first  place, 
purchase  at  the  present  moment  meant  purchase  "at 
accommodation  price,  of  a  monopoly  that  ought  never 
to  have  been  allowed  to  grow  up.  It  meant  that  the 
State  would  have  to  buy,  as  a  going  concern  [i.  e.,  at 
the  market  value] ,  a  monopoly  which  will  fall  into  our 
laps  in  191 1."  In  the  second  place,  the  Government 
was  opposed  to  nationalization  of  the  telephones  be- 
cause of  the  great  political  and  financial  danger  inherent 
in  any  further  increase  of  the  number  of  civil  servants. 
The  Post  Office  already  was  employing  160,000  peo- 

*  Compare  Hansard's  Parliamentary  Debates;  July  24,  1899.  Mr. 
H.  Kimber,  M.  P.  for  Wandsworth,  states  that  many  provincial 
towns  had  informed  the  Postmaster  General  that  they  desired  that 
the  local  telephone  services  be  in  the  hands  of  small  companies  who 
should  obtain  their  way-leaves  from  the  local  authorities. 


ALL-ROUND   COMPETITION    AUTHORIZED      243 

pie;  an  efficient  system  of  State  telephones  would  add 
to  that  number  some  20,000  or  30,000  people,  whom 
the  Government  would  have  to  pay  materially  higher 
wages  than  the  National  Telephone  Company  was  pay- 
ing. Upon  this  latter  subject,  Mr.  Hanbury's  con- 
cluding words  were :  "We  do  not  regard  it  as  by  any 
means  a  certainty  that  191 1  will  see  the  end  of  the 
licenses  of  the  new  licensees.  If  nationalization  is  as 
unpopular  with  the  Government  of  that  day  as  it  is 
with  the  present  Government,  municipalities  will  re- 
tain the  service  long  after  191 1." 

Mr.  Hanbury  did  not  content  himself  with  the  fore- 
going  statements,    but    w^ent    on    to    make   numerous 

charges   and    insinuations   which   were 
Mr.  H anbury's  .         .    .     .       . 

Indictment  of         ^s    unfounded    m    fact    as    they    were 

National  Tele-       damaging  to   the   National   Telephone 

phone  Company       ^  ..  cc       •        .      .\  ^ 

Company,  as  well  as  offensive  to  the 

honorable  body  of  men  who  had  taken  up  the  telephone 

when  it  was  commonly  deemed  a  mere  scientific  toy, 

and  had  brought  it  to  such  a  point  of  general  use  as 

popular  prejudice  and  the  great  game  of  municipal  and 

national  politics  had  permitted. 

Mr.   Hanbury's  first   charge   against   the   National 

Telephone  Company  was  that  the  "figures  with  regard 

to  telephonic  communication  are  positively  alarming." 

In  support  of  this  statement  Mr.  Hanbury  said  there 

was  in  England  one  telephone  for  each  636  people, 

whereas  there  was:  in  Switzerland,  one  telephone  for 

each  100  people;  in  Germany,  one  telephone  for  each 


244         THE    TELEPHONE    IN   GREAT    BRITAIN 

149  people;  in  Norway  and  Sweden,  one  telephone  for 
each  144  or  147  people;  and  in  the  United  States,  one 
telephone  for  each  132  people.  At  the  time  of  this 
statement,  there  was  in  England  one  telephone  for  each 
308  people.^  Mr.  Hanbury  made  the  foregoing  inac- 
curate statement  in  the  House  of  Commons  on  March 
6,  and  he  repeated  it  on  June  20,  though  Mr.  Gaine's 
correction  of  the  inaccuracy  had  been  published  in  The 
Electrician  of  May  12. 

Mr.  Hanbury  next  said  that  the  public  wanted  a 
general  service,  but  the  National  Telephone  Company 
A  General  ^^^^    picked    out   only    the   best    spots. 

Service  Wanted  "Being  a  private  company  they  natu- 

rally consulted  their  own  interests ....  We  have  been 
told  by  the  Chairman  of  the  Company  that  they  would 
not  extend  their  service  beyond  [after]  1904,  and  that 
it  could  not  be  expected  that  a  private  company  should 
extend  telephones  over  the  whole  kingdom."  This 
statement  was  in  direct  conflict  with  the  testimony 
given  before  the  Select  Committee  of  1898  by  Mr. 
Lamb,  Assistant  Secretary  to  Post  Office;  by  Mr.  Ar- 
nold Morley,  Postmaster  General  from  1892  to  1895 ; 
and  by  Mr.  W.  H.  Preece,  Engineer-in-Chief  to  Post 
Office.  Moreover,  on  March  6,  1899,  Sir  James  Fer- 
gusson  had  stated  in  the  House  of  Commons,  in  reply 
to  Mr.  Hanbury,  that  "wherever  twelve  subscribers 
could  be  obtained,  the  company  opened  an  exchange."^ 

^The  Electrician;  May  12,  1899. 

-Hansard's  Parliamentary  Debates;  March  6,   1899,  p.  1399. 


ALL-ROUND  COMPETITION  AUTHORIZED     245 

The  statement  that  "it  could  not  be  expected  that  a 
private  company  should  extend  telephones  over  the 
whole  kingdom,"  was  not  made  by  the  Chairman  of  the 
National  Telephone  Company,  either  before  the  Select 
Committee  of  1895,  or  before  the  Select  Committee  of 
1898,  or  in  the  course  of  the  Glasgow  Inquiry  of  1897. 

Mr.  Hanbury  next  said :  "I  am  bound  to  say  there  is 
one  other  thing  that  impresses  me  very  much  as  to  the 
Undue  Political  necessity  of  regulating,  at  any  rate,  a 
Iniiuence  Alleged  monopoly  like  this.  The  indirect  in- 
fluence which  a  big  company  like  this  can  bring  to  bear, 
and  is  bringing  to  bear,  is  enormous ;  and  it  is  difficult 
to  say  where  public  policy  begins  and  private  interest 
ends,  when  all  kinds  of  preferences  and  trusteeships  can 
be  put  into  men's  hands.  I  say,  this  constitutes  one 
of  the  greatest  arguments  against  such  an  enormous 
monopoly  as  this,  which  has  such  direct  and  indirect 
power." 

If  it  be  granted,  for  argument  sake,  that  this  state- 
ment was  justified  by  the  facts,  it  still  remains  true  that 
Mr.  Hanbury's  proposed  remedy,  namely  municipaliza- 
tion of  the  telephone  service,  would  but  transfer  to  the 
Association  of  Municipal  Corporations  the  political  in- 
fluence which  it  was  proposed  to  wrest 
I  He  Lofd  Critef 
Justice  on  As-       ^^°"^  ^^^  National  Telephone  Company. 

sociation  of  Lord  Alverstone,  Lord  Chief  Justice  of 

Municipal  England,    on    the    strength    of    fifteen 

C  orporations  ,  . 

years'  experience  in  the  House  of  Com- 
mons,   has    said    of    the    Association    of    Municipal 


246        THE   TELEPHONE   IN   GREAT   BRITAIN 

Corporations,  that  "only  those  who  had  been  in  the 
House  knew  the  really  almost  unfair  weight  and 
power  which  municipal  bodies  had  in  the  House,  be- 
cause, not  only  did  the  local  member  not  dare  to  resist 
the  wishes  of  his  local  friends,  but  all  the  municipal 
corporations  acted  together,  and  when  there  had  been 
an  attempt  to  get  statutory  powers  for  private  enter- 
prise which  was  thought  to  conflict  with  the  possibil- 
ity of  municipal  trading  in  a  particular  place,  not  only 
was  the  influence  of  the  municipality  in  that  particular 
place  set  to  work,  but  the  influence,  through  the  Muni- 
cipal Corporations  Association,  of  many  other  municipal 
bodies  which  had  nothing  whatever  to  do  with  the  par- 
ticular scheme.  Without  fear  of  contradiction  he 
could  say  the  question  under  those  circumstances  was 
not  fairly  determined  upon  its  merits,  and  was  not 
fairly  discussed.  Being  no  longer  in  politics  he  had 
no  right  to  express  any  opinion  upon  the  merits  of  the 
case  [i.  e.,  municipal  trading],  beyond  saying  that  it 
was  a  question  of  such  vast  importance  that  it  ought 
to  be  thoroughly  understood  and  tested  upon  its  merits 
and  not  dealt  with  by  any  considerations  of  popularity, 
public  sentiment,  or  anything  of  that  kind."* 

Mr.  Dixon  H.  Davies  recently  has  stated  that  the 
Municipal  Corporations  were  said  to  have  spent  $2,- 
000,000  in  the  period  from  1892  to  1898  in  opposing 
private  companies'  applications  for  charters.  That 
"the  potentiality  of  such  opposition  was  in  itself  a  very 

^Journal  of  the  Society  of  Arts;  January  30,  1903. 


ALL-ROUND  COiM PETITION   AUTHORIZED     247 

serious  hamper  upon  adventure."  It  rendered  the  ap- 
plication for  a  charter  ''a  very  precarious  speculation." 

Again,  Lord  Avebury  recently  has  said :  '*It  is  ob- 
vious that  the  work  [of  administering  the  great  trad- 
ing ventures  of  the  large  cities]  is  not  really  done  by 
the  [City]  Council,  it  is  not  even  done  by  the  Com- 
mittees; it  is  really  done  by  the  staff.  The  London 
County  Council  is  the  most  striking  case,  but  in  all  our 
great  municipalities  we  are  building  up  a  gigantic 
bureaucracy.  They  are  welded  into  a  great  organiza- 
tion, the  Municipal  Corporations  Association,  which, 
as  we  shall  see  in  a  subsequent  chapter,  has,  with  the 
best  intentions,  I  fully  admit,  already  done  much  to 
hamper  and  impede  the  progress  of  the  nation."^ 

In  short,  the  remedy  for  such  evil  influence  as  Mr. 
Hanbury  alleged  was  being  exerted  by  the  National 
Telephone  Company,  lies  not  in  the  legislative  limita- 
tion of  the  power  and  the  scope  of  the  great  trading 
corporations,  but  in  the  upbuilding  of  a  public  opinion 
of  such  intelligence  and  integrity  as  shall  prevent  the 
abuse  of  power  by  any  aggregation  of  capital  or  of 
men,  1  2  that  aggregation  a  great  trading  company,  or 
a  combination  of  municipal  statesmen  and  municipal 
employees,  such  as  is  the  Association  of  Municipal  Cor- 
porations, before  whom  has  bowed  more  than  one  Min- 
istry and  more  than  one  Parliament. 

Mr.  Hanbury  next  stated  that  Parliament  would  be 

*  Lord  Avebury :  On  Municipal  and  National  Trading ;  p.  32. 
Lord  Avebury  has  been  Vice-Chairman  and  Chairman  of  the  London 
County    Council. 


248        THE    TELEPHONE    IN    GREAT    BRITAIN 

able  to  impose  on  the  new  licensees — local  authorities, 
or  small  local  companies — conditions  which  could  not 
Statutory  ^^  imposed  on  the  National  Telephone 

Obligations  Company,    to-wit,    the    obligation    to 

supply  and  the  prohibition  of  undue  preference.  This 
statement  was  contradicted  by  the  fact  that  the  Na- 
tional Telephone  Company  at  that  very  moment  for 
the  sixth  time  was  applying  to  Parliament  for  statu- 
tory powers  under  the  offer  to  come  tmder  all  the  usual 
obligations,  namely :  obligation  to  supply,  prohibition 
of  undue  preference  and  the  imposition  of  maximum 
charges. 

Mr.  Hanbury  next  stated  that  the  possibility  of  com- 
petition from  local  authorities  and  small  companies 
"might  have  the  result  of  wakening  up  the  National 
Company  to  give  a  better  service."  The  charge  im- 
plied in  this  statement  was  contradicted  by  Mr.  Han- 
bury's  own  words,  that  wherever  the  National  Tele- 
phone Company  had  obtained  way-leaves,  they  had 
given  "a  physically  effective  service."  It  was  contra- 
dicted also  by  the  testimony  given  before  the  Select 
Committee  of  1895  by  Mr.  W.  H.  Preece,  Engineer-in 
Chief  to  Post  Office,  namely,  that  the  National  Tele- 
phone Company  were  renovating  their  entire  plant  and 
doing  all  they  could  to  make  their  service  "as  good  as 
it  can  be  made."^ 

Mr.  Hanbury  next  stated  that  a  large  part  of  the 

'  Report  from  the  Select  Committee  on  the  Telephone  Service, 
1895;  q.  2932,  2816,  2973  to  297s  and  5360. 


ALL-ROUND  COMPETITION   AUTHORIZED     249 

opposition  to  the  Government's  Bill  came  from  Liver- 
pool and  Nottingham,  which  cities  had  made  very  fav- 
orable contracts  with  the  National  Telephone  Company. 
But  he  did  not  propose  that  those  large  cities  should 
stand  in  the  way  of  the  smaller  cities  "not  so  well  able 
to  fight  their  own  battles."  This  statement  ignored 
the  fact  that  the  National  Telephone  Company  had 
stated  before  the  Select  Committee  of  1898  that  it  was 
ready  to  make  with  any  local  authority  contracts  similar 
to  the  Liverpool  contract.  It  ignored  also  the  fact  that 
one  of  the  earliest  contracts  had  been  made  with  Wind- 
sor, a  town  of  only  14,000  inhabitants.  Finally,  it 
ignored  the  fact  that  the  Company  already  had  made 
contracts  with  340  local  authorities.^ 

Mr.  Hanbury  next  stated  that  "it  came  out  very 
clearly  in  evidence  before  the  Select  Committee,  of 
which  I  was  Chairman,  that  the  wages  of  the  Com- 
pany's operatives  are  excessively  low.  We  found  that 
out  by  experience,  also,  when  we  took  over  the  opera- 
tors on  the  [Company's]  trunk  wires,  and  we  had  to 
raise  their  wages  by  over  40  per  cent."  Before  the 
Committee  in  question  Mr.  W.  H.  Preece,  Engineer- 
in-Chief  to  Post  Office,  had  testified  that  the  increase 
in  question  had  been  about  20  per  cent. ;  and  Mr.  J.  S. 
Forbes,  Chairman  National  Telephone  Company  had 
testified :  "We  take  a  liberal  interpretation  of  the  mar- 
ket value  of  the  article,  and  it  is  sad  to  say  that  for 


^The   Electrician;  May   12,   1899;   and  Hansard's   ParUamentary 
Debates;  June  20,  1899,  p.  152,  Mr.  McArthur,  M.  P.  for  Liverpool. 


250        THE    TELEPHONE    IN   GREAT    BRITAIN 

everybody  we  employ  at  our  wages  (which  are  not 
ilHberal),  we  can  have  a  dozen  people  to  fill  a  vacancy."* 

When  Mr.  Hanbury  made  the  damaging  statement 
that  the  National  Company's  wages  were  "excessively 
low,"  he  stood  on  record  in  Hansard  as  having  made 
repeatedly  the  statement  that  the  wages  paid  by  the 
Post  Office  were  determined  largely  by  the  political 
pressure  exerted  by  the  postal  and  telegraph  employees, 
and  that  it  might  become  necessary  to  disfranchise  those 
employees.  And  in  January,  1902,  when  Mr.  Han- 
bury was  under  the  necessity  of  defending  the  tariffs 
made  by  the  Post  Office  Telephone  Exchanges  in 
Metropolitan  London,  he  said :  "I  am  quite  convinced 
that  in  the  Post  Office  [Telephone]  Service  we  are 
paying  for  this  class  of  labor  a  great  deal  more  than 
we  have  any  necessity  to  pay."^ 

No  adequate  reply  was  made  to  the  numerous  in- 
accurate and  damaging  statements  made  by  Mr.  Han- 
Mr.  Hanbury  bury  upon  the  Second  Reading  Motion 
not  Answered  of  the  Telegraph  Bill.  The  Members 
of  the  House  who  were  in  a  position  to  make  effective 
replies  w^ere  financially  interested  in  the  National  Tele- 
phone Company,  and  the  practice  of  the  House  forbade 
their  defending  the  Company  at  that  stage  of  the  dis- 
cussion. But  on  the  occasion  of  the  First  Reading  of 
the  Bill,  early  in  March,  Sir  James  Fergusson  pointed 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  4737 
to  4741,  Mr.  W.  H.  Preece;  and  q.  8818.  Mr.  J.  S.  Forbes. 

''Hansard's  Parliamentary  Debates;  January  27,  1902,  p.  1032, 
Mr.  Hanbury,  President  Board   of  Agriculture. 


ALL-ROUND   COMPETITION    AUTHORIZED      251 

out  many  of  the  inaccurate  statements  made  by  Mr. 
Hanbury.  But  the  Financial  Secretary  ignored  Sir 
James  Fergusson's  speech,  and  repeated  many  of  his 
objectionable  statements  in  his  Second  Reading  speech. 
Sir  James  Joicey,  late  chief  proprietor  of  the  Nezv- 
castle  Daily  Leader,  followed  Mr.  Hanbury.  He  ques- 
tioned the  judgment  of  Mr.  Hanbury  on  the  question 
whether  the  municipalities  would  eventually  give  way- 
leaves.  He  said  :  "No  doubt  there  might  be  one  or  two 
municipalities  who  would  object.  There  are  munici- 
palities who  object  to  everything  where  the  public  con- 
venience is  concerned.  As  a  rule,  municipalities  look 
after  the  interest  of  the  ratepayers  in  their  own  locali- 
ties excellently,  but  wherever  the  public  interest  clashes 
with  their  own,  they  support  their  own  as  against  that 
of  thepubHc "^ 

The  Telegraph  Act,  1899,^  provided  the  Post  Office 
with  $10,000,000  to  be  spent  in  beginning  the  work  of 
establishing  at  its  pleasure  Post  Office  telephone  plants ; 
The  Telegraph  ^t  the  same  time  it  obliged  the  National 
Act,  1899  Telephone  Company  to  obtain  the  con- 

sent of  the  Postmaster  General  before  establishing  ex- 
changes in  any  area  in  which  it  had  not  exchanges  in 
operation  on  the  passage  of  the  Act.  It  gives  all  local 
authorities  the  right  to  raise  money  for  the  purpose  of 
establishing  telephone  exchanges,  and  it  authorizes  the 

^Hansard's  Parliamentary   Debates;  June   20,   1899,  p.    118. 
"  62  and  63  Victoria,  c.  38. 


252        THE    TELEPHONE    IN    GREAT    BRITAIN 

Postmaster  General,  with  the  consent  of  the  local  au- 
thority concerned,  to  issue  licenses  to  local  companies. 
In  those  areas  in  which  the  Post  Office  itself  shall 
establish  competing  exchanges,  the  license  of  the  Na- 
tional Telephone  Company  will  not  be  extended  beyond 
191 1.  But  if  a  license  shall  be  granted  to  a  municipal- 
ity or  a  local  company,  and  shall  be  made  to  run  beyond 
191 1,  and  a  competing  exchange  shall  actually  be  es- 
tablished, the  license  of  the  National  Telephone  Com- 
pany, for  the  area  affected,  shall  be  extended  for  a 
similar  period,  provided  that  the  National  Telephone 
Company  shall  abandon  its  power  to  show  preference 
between  subscriber  and  subscriber,  shall  agree  to  keep 
its  charges  between  the  maxima^  and  minima  pre- 
scribed by  the  Postmaster  General,  and  shall  not,  as  a 
condition  of  giving  service,  require  from  any  person 
the  grant  of  any  facility  except  for  the  purpose  of  sup- 
plying telephonic  communication  to  that  person.  Fur- 
thermore, if  the  National  Telephone  Company's  license 
for  any  local  area  shall  be  extended  for  as  much  as 

Provision  for  ^'^^^^^  y^^^^'  ^^""^  Company  will  be  bound, 
Inter-com-  under  certain  conditions,  to  grant  inter- 

■  communication  between  its  subscribers 

and  its  competitor's  subscribers.  The  conditions  are: 
When  the  subscribers  of  the  competing  licensee  equal 
or  exceed  in  number  one-fourth  of  those  of  the  Com- 

_'0n  July  22,  1899,  the  Post  Office  had  bound  itself  not  to  pre- 
scribe any  maximum  rates  for  unlimited  user  that  should  go  below 
the  National  Telephone  Company's  existing  maximum  charges.  Re- 
port from  the  Select  Committee  on  Post  OMce  (Telephone  Agree- 
ment),  1905;  p.  263. 


ALL-ROUND  COMPETITION   AUTHORIZED      253 

pany,  in  the  competing  licensee's  area,  or  number  f;oo, 
mutual  inter-communication  shall  be  afforded  within 
the  area  of  the  competing  licensee.  Such  intercom- 
munication is  termed  "restricted  inter-communication." 
When  the  Company's  exchange  area  exceeds  in  extent 
the  competing  licensee's  area,  then  when  the  subscrib- 
ers to  the  competing  licensee  equal  or  exceed  in  number 
one-fourth  of  those  of  the  Company  throughout  the 
Company's  whole  exchange  area,  mutual  inter-com- 
munication shall  be  afforded  throughout  the  whole  ex- 
change area  of  the  Company.  Such  inter-communica- 
tion is  to  be  called  "unrestricted  inter-communication." 
Restricted  and  unrestricted  inter-communication  may 
exist  side  by  side  on  different  terms.  The  Company 
may  charge  as  follows  for  restricted  inter-communica- 
tion :  three  cents  per  call  when  the  competing  licensee's 
subscribers  number  500,  but  are  less  than  one-fourth 
of  the  Company's  subscribers;  two  cents  per  call  when 
the  competing  licensee's  subscribers  are  between  one- 
fourth  and  one-half  of  the  Company's  subscribers;  nil, 
when  the  competing  licensee's  subscribers  equal  one- 
half  the  number  of  the  Company's  subscribers.  In  case 
of  unrestricted  inter-communication,  the  Company  may 
charge :  two  cents  per  call  when  the  competing  licen- 
see's subscribers  are  between  one-fourth  and  one-half 
of  the  Company's  subscribers ;  nil,  when  the  competing 
licensee's  subscribers  number  one-half  of  the  Com- 
pany's subscribers. 

Wherever,  at  the  date  of  the  enactment  of  the  Tele- 


254        THE   TELEPHONE   IN   GREAT   BRITAIN 

graph  Act,  1899,  the  National  Telephone  Company  had 
made  terminable  contracts  with  local  authorities  for 
underground  way-leaves,  those  contracts  shall  be  ex- 
tended during  the  life  of  the  license  of  the  competing 
licensee,  provided  the  Company  shall  agree  to  abandon 
the  power  to  show  preference,  shall  consent  to  keep  its 
charges  between  maxima  and  minima  prescribed  by  the 
Postmaster  General,  and  i:hall  not,  as  a  condition  of 
giving  a  service,  require  from  any  person  the  grant  of 
any  facility  except  for  the  purpose  of  supplying  tele- 
phone communication  to  that  person. 

The  Postmaster  General  has  power  to  fix  minimum 
and  maximum  charges  for  any  licensee  competing  with 
the  National  Telephone  Company.  The  power  to  pre- 
scribe minimum  charges  was  conferred  on  the  Post- 
master General  in  order  that  he  might  prevent  the 
establishment  of  unremunerative  rates,  "since  the  Gov- 
ernment might  on  termination  of  the  license  want  to 
take  over  the  municipal  telephone,  and  would  not  want 
to  take  over  a  non-paying  plant."^ 

The  undertaking,  given  by  the  Post  Ofifice  to  the 
National  Company  on  July  22,  1899,  not  to  prescribe 
for  that  Company  any  maxima  for  unlimited  user  which 
should  be  lower  than  the  Company's  then  existing 
rates,  is  instructive;  for  the  reason  that  the  agitation 
which  the  Government  hoped  to  meet  by  the  Telegraph 
Act  rested  all  but  completely  on  the  popular  assump- 

*  Hansard's  Parliamentary  Debates;  July  24,  p.  305,  and  July  25, 
p.  308,  Mr.  R.  W.  Hanbury. 


ALL-ROUND   COMPETITION    AUTHORIZED     255 

tion  that  it  was  possible  to  telephone  Metropolitan 
London  on  a  charge  of  $50  a  year  for  unlimited  user; 
and  to  telephone  large  cities  like  Glasgow,  Manchester 
and  Liverpool  on  a  charge  of  $25  a  year  for  unlimited 
user. 

To  those  local  authorities  that  had  made  no  contracts 
with  the  National  Telephone  Company  for  way-leaves, 
Unfair  Com-  the  Telegraph  Act,  1899,  left  the  power 
petition  to  establish  competing  plants  while  at 

the  same  time  withholding  way-leave  powers  from  the 
National  Telephone  Company.  Glasgow  and  Brigh- 
ton took  advantage  of  that  power;  they  established 
municipal  plants  with  underground  wires,  at  the  same 
time  denying  the  National  Telephone  Company  the 
power  to  put  its  wires  under  the  ground.^  Prominent 
Glasgow  statesmen  publicly  announced  that  it  was  the 
desire  of  Glasgow  to  destroy  the  National  Telephone 
Company's  property  in  Glasgow.  Brighton  refused 
the  National  Telephone  Company  way-leaves,  partly 
because  the  Company  refused  to  lower  its  tarifif  in 
Brighton;  partly  because  Brighton  believed  that  the 
Post  Office  would  buy  its  plant,  on  the  expiry  of  the 
license,  in  preference  to  the  Company's  plant,  since  the 
latter  would  be  exclusively  an  overhead  and  house-top 
plant. 

Finally,   in  the   Standard  License^   issued   to   local 

*  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  874,  Mr.  D.  M.  Stevenson,  Sub-convener  Glas- 
gow Telephone  Committee ;  and  q.  918,  938  and  943  to  949,  Mr. 
Alderman  Garden,  of  Brighton. 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  p.  314. 


256        THE   TELEPHONE   IN   GREAT   BRITAIN 

authorities  under  the  Telegraph  Act,  1899,  the  Post- 
master General  binds  himself  to  buy,  and  the  local  au- 
thority binds  itself  to  sell,  at  the  expiry  of  the  license, 
all  of  the  local  authority's  plant  that  shall  be  "suitable 
for  the  actual  requirements  of  the  telephone  service  of 
the  Post  Office  within  the  licensed  area."  The  price 
to  be  paid  is  to  be  the  cost  of  reconstruction,  less  allow- 
ance for  such  depreciation  as  may  have  taken  place  in 
consequence  of  imperfect  state  of  repair. 

The  Telegraph  Act,  1899,  did  not  put  the  Postmaster 
General  under  any  obligation  to  purchase  any  of  the 
plant  of  the  National  Telephone  Company  situated 
within  the  exchange  area  of  any  competing  local 
authority ;  nor  did  the  Postmaster  General  subsequently 
assume  that  obligation  when  issuing  licenses  to  local 
authorities.  On  the  other  hand,  Mr.  Hanbury,  in  his 
First  Reading  speech  "quite  admitted"  that  it  would 
be  unfair  to  agree  to  buy  the  plant  of  a  Municipality 
without  making  a  similar  agreement  with  the  National 
Telephone  Company.^  Furthermore,  the  Treasury 
Minute  of  May,  1899,  had  said:  "My  Lords  [of  the 
Treasury]  propose  that  where,  within  reasonable 
period,  bona  Ude  competition  between  the  National 
Telephone  Company  and  any  local  authority  is  es- 
tablished in  any  area  where  the  Company  are  now 
working,  similar  treatment  [1.  e.,  purchase  at  value  in 
situ']  should  be  applied  to  so  much  of  the  plant  of  the 

^Hansard's  Parliamentary  Debates;  March  6,  1899,  p.  1390,  Mr. 
R.   W.  Hanbury. 


ALL-ROUND  COMPETITION   AUTHORIZED     257 

Company  in  such  area  as  existed  at  the  time  when  such 
competition  was  inaugurated.  Further,  if  the  Com- 
pany within  a  reasonable  period  give  inter-communica- 
tion in  such  area  between  their  exchanges  and  the  ex- 
changes of  the  local  authority,  on  conditions  approved 
by  the  Postmaster  General,  the  purchase  will  extend  (on 
the  same  terms)  to  the  plant  of  the  Company  con- 
structed (with  the  sanction  of  the  Postmaster  General) 
after  the  commencement  of  the  competition."- 

In  a  preceding  chapter  has  been  given  the  evidence, 
pro  and  con,  upon  the  nice  question  whether,  in  the  ab- 
sence of  any  proof  that  the  National  Telephone  Com- 
pany had  failed  in  its  duty  as  a  public  service  corpora- 
tion, Parliament  could  authorize  all-round  competition 
with  the  National  Telephone  Company,  without  violat- 
ing "the  equity  of  the  understanding"  reached  in  1892, 
to  use  the  words  of  Mr.  J.  S.  Forbes,  Chairman  Na- 
tional Telephone  Company.  To  the  writer  it  seems 
that  the  National  Telephone  Company  made  a  com- 
plete argument  when  it  quoted  the  declaration  of  policy 
made  in  the  House  of  Commons  by  the  Chancellor  of 
the  Exchequer,  Mr.  Goschen,  as  the  Representative  of 
the  Government.  To  the  writer  the  question  whether 
there  were  any  "verbal  assurances"  seems  entirely  su- 
perfluous. To  him  it  seems  idle  to  say  there  is  any 
"equity"  in  the  Parliamentary  repudiation  of  a  policy 
enunciated  by  a  preceding  Government  at  a  time  when 
that  Government  was  seeking  to  persuade  a  trading 

^The  Economist;  May  13,  1899. 
17 


258        THE   TELEPHONE   IN   GREAT   BRITAIN 

company  to  enter  into  a  commercial  bargain,  the  merits 
of  that  bargain  turning  very  largely,  if  not  exclusively, 
on  the  question  of  the  use  that  the  Government  pro- 
posed to  make  of  the  position  of  advantage  which  it 
contemplated  gaining  by  means  of  that  commercial 
bargain.  However,  leaving  aside  entirely  the  question 
of  the  equity  of  the  authorization  of  all-round  competi- 
tion, there  can  be  no  question  that  the  competition  ac- 
tually authorized  was  unfair.  It  was  unfair :  to  allow 
large  cities,  such  as  Glasgow  and  Brighton,  to  withhold 
way-leaves  from  their  competitor,  the  National  Tele- 
phone Company;  to  agree  to  purchase  "at  structural 
value"  the  plants  of  the  competitors  of  the  National 
Telephone  Company;  and  to  promise  any  municipality 
that  could  acquire  a  number  of  subscribers  equal  to  one- 
half  the  number  of  subscribers  of  the  National  Tele- 
phone Company,  the  free  use  of  the  plant  of  the  Na- 
tional Telephone  Company,  especially,  since  the  area 
covered  by  the  municipality  need  not  be  co-extensive 
with  the  area  covered  by  the  Company.  Had  any 
municipality  become  able  to  take  advantage  of  the  pro- 
vision for  free  intercommunication,  it  would  in  effect 
have  become  a  part  owner  of  the  National  Telephone 
Company's  local  plant,  without  having  invested  a  pen- 
ny in  that  plant. 

The  Report  of  the  Select  Committee  of  1898  and 
the  Telegraph  Act,  1899,  inflicted  serious  financial 
losses  upon  the  holders  of  every  class  of  National  Tele- 


ALL-ROUND  COMPETITION   AUTHORIZED     259 

phone  Company  securities.     The  Select  Committee  re- 
ported on  August  9,  1898.     On  November  30,  1898, 

.    .       ,      the   market    value   of   the   Company's 
Depreciation  of 
National  Tele-      securities  was  $29,045,190.     The  mar- 

phonc  Company  ket  value  would  have  been  $34,252,765, 
had  the  several  classes  of  securities  sold 
at  the  average  price  which  they  had  brought  in  the  three 
years  ending  with  June  30,  1898.^  Mr.  Hanbury  in- 
troduced the  Telegraph  Bill  on  March  6,  1899,  and  by 
March  10,  the  aggregate  value  of  the  National  Tele- 
phone Company's  securities  had  fallen  to  a  little  over 
$26,250,000.^  The  destruction  of  values  was  lasting; 
in  March,  1904,  the  aggregate  market  value  of  the  fore- 
going securities  was  $25,168,000.^  Such  was  the 
treatment  accorded  by  Parliament — under  pressure 
from  the  Association  of  Municipal  Corporations,  the 
London  County  Council,  the  City  of  London,  Glasgow 
and  Edinburgh — to  a  body  of  men  who,  in  1878,  had 
taken  up  an  invention  which  the  Government  had 
deemed  itself  incompetent  to  take  up  because  of  the 
House  of  Commons'  practice  of  intervening  in  the 
business  details  of  the  Government's  great  trading  de- 
partment, the  Post  Office.  In  the  period  from  April, 
1890,  to  December,  1898,  the  capital  actually  invested 
in  plant  and  patent  rights  by  the  foregoing  body  of 
men,  had  earned  a  net  revenue  of  barely  nine  per  cent. 

^  The  Economist ;  December  3,  1898;  and  The  Times,  November 
30,  1898,  p.  4,  column  2. 

^The  Economist :  March   11,  1899. 

*The  Economist;  March  26,  1904;  and  Report  from  the  Select 
Committee  on  Post  Office  (Telephone  Agreement),  1905  ;  p.  248. 


260        THE   TELEPHONE   IN   GREAT   BRITAIN 

There  had  not  been  supported  by  evidence  or  argument 
that  would  be  deemed  conclusive  in  any  court  of  law, 
a  single  one  of  the  charges  of  violation  or  neglect  of 
duty,  that  had  been  made  against  the  National  Tele- 
phone Company  in  the  newspaper  press,  in  the  House 
of  Commons,  or  before  Parliamentary  Select  Com- 
mittees. 

From  the  effect  of  the  Telegraph  Act,  1899,  upon 
investors  in  the  securities  of  the  National  Telephone 
Company,  we  may  turn  to  its  effect  upon  the  statesman 
Mr.  Hanbury  a  ""^'^^  saw  fit  to  champion  the  cause  of 
Cabinet  Minister  the  Association  of  Municipal  Corpora- 
tions, the  London  County  Council,  Glasgow  and  Edin- 
burgh. In  the  reorganization  of  the  Salisbury  Minis- 
try which  followed  the  general  elections  of  1900,  Mr. 
Hanbury  was  promoted  to  the  Cabinet,  or  inner  circle 
of  the  Ministry,  being  made  President  of  the  Board  of 
Agriculture.  The  manner  in  which  he  had  discharged 
his  duties  as  Representative  of  the  Postmaster  General 
in  the  House  of  Commons,  seems,  however,  not  to  have 
commended  itself  completely  to  his  political  superiors. 
He  was  not  given  the  position  for  which  he  was  the 
logical  candidate,  namely  the  Postmaster-generalship. 
Within  the  a  year  after  Mr.  Hanbury's  promotion  to 
the  Board  of  Agriculture,  the  Government  abandoned 
the  policy  of  competition  with  the  National  Telephone 
Company  so  far  as  Metropolitan  London  was  con- 
cerned.    And  in  little  more  than  four  years  after  Mr. 


ALL-ROUND   COMPETITION   AUTHORIZED     261 

Hanbury's  promotion  to  the  Board  of  Agriculture,  the 
Government  abandoned  as  an  utter  faikire  the  policy 
of  municipal  competition  with  the  National  Telephone 
Company, 

The  Telegraph.  Act,  1899,  offered  upward  of  1300 
local  authorities  the  opportunity  to  engage  in  the  tele- 
phone business.  The  Post  Office  offered  every  induce- 
ment at  its  command;  as  late  as  February,  1903,  it 
T  hcri-  Hi  A  t  offered  the  Corporation  of  Southport 
1899,  a  "Ludi-  a  license  to  run  to  December  31,  1927. 
crous"  Failure  About  sixty  local  authorities  took  the 
trouble  to  inquire  about  the  terms  on  which  licenses 
could  be  obtained;  thirteen  took  out  licenses;  six  mu- 
nicipalities installed  telephone  exchanges;  and  of  those 
six,  one  sold  out  to  the  National  Telephone  Company 
after  two  and  one-half  years'  experience.  The  Tinies^ 
summed  up  the  failure  of  the  Act  with  the  words :  "A 
ludicrous  result  to  those  who  can  recall  much  magnifi- 
cent declamation  about  securing  to  the  public  the  splen- 
did possibilities  of  a  new  discovery." 

The  Act  excluded  the  National  Telephone  Company 
from  those  areas  in  which  it  had  not  established  tele- 
phone exchanges  at  the  time  of  the  enactment.  Mn 
Hanbury's  argument  was  that  the  experience  of  Nor- 
way and  Sweden  proved  that  the  thinly  populated  dis- 
tricts were  profitable  ones  to  work;  and  that  the  local 
authorities  would  take  up  the  business  if  guaranteed 

'August  10,  1905. 


262        THE   TELEPHONE   IN   GREAT   BRITAIN 

exemption  from  competition.^  When  he  made  this 
statement  he  had  before  him  the  testimony  of  Mr  W. 
H.  Preece,  Engineer-in-Chief  to  Post  Office,  to  the 
effect  that  it  had  been  no  fault  of  the  National  Tele- 
phone Company  that  the  Company  had  failed  to  install 
telephone  exchanges  in  the  rural  districts.  The  Com- 
pany had  canvassed  the  districts  "extremely  actively," 
but  without  success.2  Mr.  Preece's  belief  that  the 
Post  Office  could  build  up  a  system  of  rural  telephones 
by  employing  the  existing  rural  Post  Office  and  tele- 
graph plant  and  staff,  of  course,  was  no  argument  that 
the  local  authorities  would  find  it  profitable  to  install 
exchanges,  for  the  latter  could  not  utilize  the  Post 
Office  buildings  and  staff.  Mr.  Hanbury's  assumption 
that  the  local  authorities  in  the  rural  districts  would 
take  up  the  telephone  business  was  completely  falsified 
by  the  facts.  Not  a  single  local  authority  took  any 
steps  whatever. 

The  exclusion  of  the  National  Telephone  Company 
from  the  areas  in  which  it  had  not  established  itself  hi 
1899  operated  to  the  detriment  of  the  public  in  those 
Conservatism  ^'"^^S"  ^^  the  time  of  the  exclusion  it 
of  the  Post  was  the  policy  of  the  Company  to  es- 

tablish  exchanges  wherever  they  could 
get  a  dozen  subscribers  at  $40  a  year  each ;  and  many 
exchanges  had  been  opened  in  the  hope  that  they  would 

^Hansard's  Parliamentary  Debates:  June  25,  p.  346,  and  July  24, 
1899,  p.  138. 

"Report  from  the  Select  Committee  on  Telephones,  1898;  q.  4914 
and    5133. 


ALL-ROUND  COMPETITION   AUTHORIZED      263 

in  due  time  become  profitable.  When  the  Post  Office 
was  called  upon,  after  1899,  to  fill  the  void  created  by 
the  exclusion  of  the  National  Telephone  Company  and 
the  failure  of  the  local  authorities  to  take  advantage 
of  the  opportunities  which  they  had  demanded,  the  Post 
Office  acted  more  conservatively  than  the  National 
Telephone  Company  had  acted.  It  has  always  de- 
manded a  guarantee  before  it  has  consented  to  open  an 
exchange  that  did  not  promise  to  be  self-sustaining 
from  the  moment  of  opening.  To  illustrate,  in  1905, 
the  Post  Office  declined  to  modify  its  demand  of  a 
guarantee  of  25  subscribers  at  $25^  each  before  open- 
ing an  exchange  at  Buncrana;  and  in  June,  1904,  the 
Post  Office  demanded  a  guarantee  of  $725  a  year  for 
seven  years  as  a  condition  of  extending  its  trunk  line 
from  Limerick  to  Nenagh.^  Of  the  56  Post  Office 
Exchanges  opened  in  1905-6,  ten  were  opened  under 
guarantees.  In  March,  1906,  the  Post  Office  had  spent 
only  $2,020,000  upon  exchanges  outside  of  Metropoli- 
tan London,  though  it  had  been  given  $5,000,00  in 
1899. 

There  were  two  reasons  for  the  complete  failure  of 
the  Telegraph  Act,  1899.  The  first  was  the  conserva- 
tism of  the  local  authorities;  the  second  was  the  in- 
ability of  adjoining  local  authorities  to  overcome  paro- 


*  To  cover  480  local  calls. 

'Hansard's  Parliamentary  Debates;  June  15,  p.  133,  and  June 
24,  1904,  p.  1 1 18;  and  August  i,  190S.  P-  ii75.  Lord  Stanley,  Post- 
master General. 


264        THE   TELEPHONE    IN   GREAT    BRITAIN 

chial  jealousies  and  to  cooperate  in  the  establishment 

of  exchanges  of  a  practical  size  and   extent.     Upon 

J  ,  .  „  .,.  ,  the  first  point,  Mr.  D.  M.  Stevenson, 
Local  Authorities  ^  ' 

Conservatism  Sub-convener  of  the  Glasgow  Tele- 
and  Incapacity  ^i^q^q  Committee,  testified  as  follows  in 
1905.  "The  Corporations  have  been  waiting  to  see  what 
was  the  result  of  the  experiments  made  by  the  few 
[six]  municipalities  who  operated  under  licenses.  The 
results  are  still  being  contested.  Part  of  the  Press  tell 
us  we  [Glasgow]  are  losing  money,  but  we  believe  we 
are  paying  our  way;  but  other  Corporations  want  to 
see  that  the  finances  are  safe  before  going  further; 
latterly^  they  have  been  face  to  face  with  the  statement 
that  they  will  not  be  licensed  beyond  191 1,  and  there- 
fore none  of  them  will  look  at  a  license  now."^ 

Upon  the  question  of  the  inability  of  adjoining  local 
authorities  to  cooperate  in  the  establishment  of  a  "Joint 
Telephone  Board,"  we  have  the  interesting  experience 
of  Manchester  with  the  adjoining  thirty-one  local  au- 
thorities included  in  the  National  Telephone  Company's 
Manchester  area  of  180  square  miles.  In  1900,  Man- 
chester began  efforts  to  secure  the  cooperation  of  the 
adjoining  local  authorities.  In  1902  it  lodged  a  Bill 
in  Parliament,  which  measure  was  disallowed  because 
of  the  opposition  of  Eccles  and  Salford,  with  popula- 
tions of  respectively  34,000  and  221,000.     In   1904, 

*As  late  as  February,  1903,  the  Post  Office  offered  Southport  a 
license  to  run  to  December  31,  1927. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  736. 


ALL-ROUND   COMPETITION   AUTHORIZED     265 

when  the  Government  abandoned  the  poHcy  of  the  Act 
of  1899,  cooperation  had  not  been  secured.^ 

Before  the  Select  Committee  of  1898,  Mr.  H.  E. 
Clare,  Town  Clerk  of  Liverpool,  had  testified  upon  this 
subject  of  local  jealousies.     He  had  said:  "I  should  be 

very  sorry  myself  to  have  to  manage  a 

Failure  Foretold      r  •   •      n    ^  1      1  j.         r        ^^ 

[municipal J    telephone  system   for  the 

Corporation  of  Liverpool,  which  [system]  comprised 
Bootle,  Birkenhead  and  the  other  local  districts."  And 
Mr.  W.  E.  L.  Gaine,  who,  before  becoming  General 
Manager  of  the  National  Telephone  Company,  had 
been  for  eighteen  years  Town  Clerk  at  Blackburn  [with 
a  population  of  130,000],  had  testified  that  the  local 
authorities  would  not  unite  to  operate  conjointly  a 
telephone  exchange  covering  a  large  area.  He  had 
drawn  attention  to  the  fact  that  at  the  very  moment 
Manchester  and  the  adjoining  local  authorities  were 
quarrelling  over  the  question  of  interurban  tramways.^ 
Mr.  J.  C.  Lamb,  Second  Secretary  to  Post  Office,  was 
on  the  point  of  testifying  upon  the  question  of  local 
jealousy,  and  the  part  played  by  that  jealousy  in  the 
Government's  policy  of  not  "entertaining"  applications 
from  municipalities  for  licenses,  under  the  administra- 
tion of  Mr.  Arnold  Morley,  Postmaster  General  from 

*  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  1993,  Sir  Robert  Hunter,  Solicitor  to  Post 
Office;  q.  933,  1007,  1033  to  1037  and  1068  to  1070,  Mr.  J.  W. 
Southern,  Alderman  of  Manchester;  and  q.  1231,  Mr.  H.  Plummer, 
Chairman   Manchester  Telephone  Committee. 

-Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  4551, 
Mr.  H.  E.  Clare;  and  q.  1648,  7075,  7091,  7116,  7i35  and  7136.  Mr. 
W.  E.  L.  Gaine. 


266        THE   TELEPHONE   IN   GREAT   BRITAIN 

1892  to  1895,  when  Mr.  Hanbury,  Chairman  of  the 
Committee,  interrupted  him  in  the  middle  of  a  sen- 
tence, with  the  words:  "I  did  not  ask  you  that " 

Mr.  Lamb  repHed :  "I  beg  your  pardon."^ 

When  Mr.  Hanbury  brought  in  the  Telegraph  Bill, 
1899,  he  had  before  him  twenty-nine  years  of  experi- 
ence of  municipal  ownership  of  tramways,  and  seven- 
teen years  of  experience  of  the  policy  of  municipal 
ownership  of  electric  lighting  plants.  The  unqualified 
verdict  of  that  experience  had  been  that  local  author- 
ities were  much  less  enterprising  than  were  companies, 
and  that,  for  all  practical  purposes,  they  were  unable 
to  cooperate  for  the  purpose  of  serving  conjointly  a 
number  of  adjoining  districts  which  the  ties  of  com- 
merce and  manufacture  had  united  into  a  commercial 
atid  manufacturing  unit. 

The  Telegraph  Act,  1899,  was  the  outcome  of  a 
series  of  indefensible  onslaughts  upon  the  National 
Telephone  Company  by  Mr.  R.  W. 
Hanbury,  Financial  Secretary  of  the 
Treasury,  and  of  the  Report  of  the  Select  Committee 
on  Telephones,  1898.  Neither  before  the  Select  Com- 
mittee nor  in  the  House  of  Commons  had  the  necessity 
of  the  policy  of  all-round  competition  with  the  National 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  2981 
to  2984.  Mr.  Lamb:  ....  "it  was  pointed  out  to  Mr.  Arnold  Mor- 
ley  (and  I  think  he  felt  it  himself  at  the  time)  that  one  of  the 
difficulties  connected  with  the  giving  of  municipal  licenses  was 
that  two  or  more  towns" —  Mr.  Hanbury  said :  "I  did  not  ask  you 
that " 


ALL-ROUND  COMPETITION   AUTHORIZED     267 

Telephone  Company  been  supported  by  arguments  con- 
sistent with  the  facts  of  the  experience  gained  under 
the  policy  of  regulated  monopoly  inaugurated  in  1892. 
On  the  other  hand,  before  the  Select  Committee  of 
1898  some  very  competent  testimony  had  been  given 
to  the  effect  that  municipal  competition  would  prove  a 
failure  because  of  the  conservatism  of  the  municipal- 
ities and  the  inability  of  the  local  authorities  to  over- 
come parochial  jealousies  and  cooperate.  And  in  the 
House  of  Commons,  one  of  the  few  Members  who  spoke 
against  the  Bill  dwelt  upon  the  fact  that  it  must  neces- 
sarily depreciate  the  securities  of  the  National  Tele- 
phone Company.  In  fact,  he  alleged  that  the  object  of 
the  Bill  was  to  depreciate  the  value  of  the  Company's 
property. 

So  far  as  concerned  the  upbuilding  of  a  system  of 
municipal  telephone  plants  that  should  make  the  Gov- 
ernment independent  of  the  National  Telephone  Com- 
pany in  December,  191 1,  the  Act  of  1899  was  a 
"ludicrous"  failure.  It  was  repealed,  so  far  as  Metro- 
politan London  was  concerned,  within  a  year  after  Mr. 
Hanbury's  passing  from  control  over  the  Post  Office. 
So  far  as  the  rest  of  the  country  was  concerned,  it  was 
repealed  early  in  1905.  In  other  respects  the  Act  was 
an  unqualified  success.  It  promoted  Mr.  Hanbury  to 
the  Presidency  of  the  Board  of  Agriculture,  a  post 
which  carried  with  it  membership  in  the  Cabinet,  or 
inner  circle  of  the  Ministry.  It  also  knocked  fully 
^  twenty-five  per  cent,  off  the  market  value  of  the  se- 


268        THE   TELEPHONE   IN   GREAT   BRITAIN 

curities  of  the  National  Telephone  Company.  That 
fact,  in  the  opinion  of  many,  was  an  achievement  of 
public  benefit,  thanks  to  the  manner  in  which  the  Na- 
tional Telephone  Company  had  been  made  the  sport  of 
the  great  game  of  local  and  national  politics. 


CHAPTER  XVI 

THE  METROPOLITAN  LONDON  AGREEMENT,   1901 

The  Post  Office  harasses  the  National  Telephone  Company 
into  granting  a  request  which  the  Post  Office  could  not  make  with 
fairness,  to-wit,  free  intercommunication  between  the  Company's 
Metropolitan  London  subscribers  and  the  subscribers  to  the  Post 
Office  Metropolitan  London  Telephone  Exchanges.  So  far  as 
Metropolitan  London  is  concerned,  the  Government  abandons  the 
Telegraph  Act,  1899,  in  November,  1901.  The  Act  achieved 
nothing  that  was  not  unfair  to  the  Company  that  could  not  have 
been  attained  in  1899  by  menas  of  friendly  negotiation  with  the 
National  Telephone  Company. 

When  the  Government  was  drafting  the  Telegraph 
Bill,  1899,  the  National  Telephone  Company  met  the 
demands  of  the  Government  "most  fairly,"  so  that  Mr. 
Hanbury  himself  asked  the  House  of  Commons  in  turn 
to  treat  the  Company  with  "perfect  fairness."^  The 
Government  had  made,  and  the  Company  had  acceded 
to,  the  request  that  the  Company  agree  to  establish 
intercommunication  between  its  subscribers  and  the 
subscribers  to  any  competing  municipal  or  company 
telephone  system,  whenever  the  Company's  license 
should  be  extended  for  a  period  of  eight  years  beyond 
1 91 1.  The  Government  had  not  insisted  upon  the  same 
privilege  for  the  future  subscribers  to  its  proposed  tele- 

^  Hansard's   Parliamentary   Debates,   June   26,    1899. 
269 


270        THE    TELEPHONE    IN   GREAT    BRITAIN 

phone  systems  in  Metropolitan  London  and  the  prov- 
inces, because  it  was  not  prepared  to  grant  the  Company 
an  extension  of  license  in  those  areas  in  which  the 
Post  Office  proposed  to  compete  with  the  Company. 
The  Government  evidently  believed  that  it  would  be 
unfair  to  ask  for  intercommunication  except  on  the 
condition  of  extending  the  Company's  license  at  least 
eight  years. 

But  when  the  Post  Office  began  to  canvass  for  sub- 
scribers to  its  proposed  Metropolitan  London  Telephone 
Exchanges,  it  found  itself  seriously  handicapped  by 
the  fact  that  it  could  not  promise  intercommunication 
with  the  Metropolitan  London  subscribers  to  the  Na- 
tional Telephone  Company,*  who,  in  1899,  numbered 
about  19,000,  and  were  increasing  so  rapidly  that  at 
the  close  of  1901  they  numbered  between  40,000  and 
50,000.  The  Government  therefore  proceeded  to 
harass  the  National  Telephone  Company  into  granting 
the  intercommunication  which  the  Post  Office  had  no 
legal  right  to  demand.  The  first  step  taken  by  the 
Government  was  to  serve  notice  on  the  Company  that 
in  all  cities  and  places  where  the  Post  Office  was  in 
The  Government's  competition,  or  expected  to  be  in  com- 
Unwarrantable  petition,  with  the  Company,  the  Post 
emand  Office  would   grant   the   Company  no 

further  way-leaves  along,  across,  or  under  railway 
property.2     Since  the  railways  intersect  in  all  direc- 

^  Report   from   the  Select   Committee   on   Post   OfUce   (Telephone 
Agreement),  1905  ;  q.  13,  Sir  Robert  Hunter,  Solicitor  to  Post  Office. 
^The  Times;  January  24,  1899. 


METROPOLITAN  LONDON  AGREEMENT   271 

tions  Metropolitan  London  and  the  larger  English 
cities,  the  Post  Office's  refusal  seriously  curtailed  the 
Company's  power  to  reach  new  subscribers  and  to  give 
existing  subscribers  additional  wires.  In  Metropolitan 
London  the  Company  began  to  be  thus  embarrassed 
fully  two  years  before  the  Post  Office  opened  a  tele- 
phone exchange.^ 

In  1892,  in  the  course  of  the  negotiations  for  the 
purchase  of  the  Company's  trunk  lines,  the  Government 
had  promised  to  give  the  Company  rights  of  way  upon 
railway  property  situated  within  the  cities  and  towns 
at  a  "nominal"  annual  rental  of  one  shilling  per  mile 
of  wire.  The  only  reservation  made  by  the  Govern- 
ment was  that  the  rights  of  way  would  be  given  "only 
in  cases  where  the  public  service  will  not  be  damaged."^ 
The  meaning  of  that  limitation  was  that  the  Post  Office 
would  not  grant  way-leaves  where  the  railway  prop- 
erty was  so  taken  up  with  telegraph  poles  and  tele- 
graph wires  that  it  was  impossible  or  inadvisable  to 
erect  telephone  poles  to  string  telephone  wires.  Pre- 
vious to  1892,  the  Company  had  paid  the  Post  Office 

^Hansard's  Parliamentary  Debates;  August  13,  1899.  p.  1247, 
Lord  Harris,  a  Director  of  the  Telephone  Company.  Who's  Who, 
1907.  Harris,  4th  Baron,  George  Robert  Canning  Harris,  Lord-in- 
Waiting  to  Queen  Victoria,  1895-1900  ;  Under  Secretary  for  India, 
1885-86;  Under  Secretary  for  VV^ar,  1886-89;  Governor  of  Bombay, 
1890-95. 

'Report  from  the  Select  Committee  on  Telegraphs  Bill,  1892; 
q.  59  to  62,  Mr.  J.  C.  Lamb,  Assistant  Secretary  to  Post  Office. 
Compare  also  Treasury  Minute.  May  2:^,  1892,  section  11:  "The 
Post  Office,  where  it  can  permit  telephone  companies  to  use  rail- 
ways, canals,  or  other  property  over  which  it  has  acquired  ex- 
clusive rights  of  way  for  telegraphs,  will  charge  a  nominal  sum  of 
IS.  per  mile  of  wire  instead  of  20s.  as  at  present." 


272        THE   TELEPHONE   IN   GREAT   BRITAIN 

an  annual  way-leave  rental  of  $5  per  mile  of  wire,  but 
Utifair  in    1892   that   rental   was   reduced   to 

Competition  $0.25,  not  only  "with  the  idea  of  facili- 

tating the  operations  of  the  Company,  but  also  as  a  con- 
cession of  some  material  value  which  may  be  set 
against  the  relinquishment  by  the  Company  of  their 
trunk  wires." 

In  March,  1899,  Sir  James  Fergusson,  who,  as  Post- 
master General,  had  conducted  the  negotiations  of 
1892,  said:  "Although  it  was  stated  in  the  House  in 
1892  by  the  Chancellor  of  the  Exchequer  that  the 
grant  of  way-leaves  for  a  nominal  rent  was  a  part  of 
the  agreement  of  1892,  we  are  now  told  that  the  Post- 
master General  will  not  grant  way-leaves  where  he  is 
competing.  .  .  .  This  is  grossly  unfair  competition,  and 
1  am  surprised  that  any  Government  should  be  party 
to  it.  I  never  thought  in  1892  that  such  an  interpreta- 
tion would  be  put  upon  the  agreement."* 

The  Government  also  gave  its  moral  support  to  the 
London  County  Council's  policy  of  refusing  to  give  the 
National  Telephone  Company  underground  way-leaves, 
except  on  conditions  which  had  nothing  to  do  with  the 
securing  of  the  comfort  and  safety  of  the  public  as 
users  of  the  streets.  Mr.  Hanbury  himself  admitted 
Mr.  Hanbury's  that  the  Post  Office  and  the  London 
Admission  County    Council    were    subjecting   the 

public  to  great  inconvenience.  On  April  27,  1900,  he 
said :    "Under   ordinary    circumstances,    perhaps,    the 

^Hansard's  Parliamentary  Debates;  March  6,  1899,  p.  1402. 


METROPOLITAN   LONDON   AGREEMENT       273 

London  County  Council  would  be  carrying  their  con- 
trol over  the  streets  too  far  to  refuse  [in  refusing]  that 
concession  to  the  public  convenience,  because  there  could 
be  no  doubt  that  a  telephone  service,  whether  by  the 
State  or  by  a  Company,  was  a  great  public  convenience. 
But  the  State  itself  was  engaged  in  constructing  a 
system  of  telephonic  communication  all  over  London, 
and  it  was  obvious  that  in  the  public  interest  there 
should  be  intercommunication  between  the  two 
systems."^ 

In  July,  1900,  the  Post  Office,  through  the  Attorney 
General,  obtained  an  Injunction  forbidding  the  Na- 
tional Telephone  Company  laying  wires  under  the 
streets  without  the  consent  of  the  Postmaster  General 
and  the  London  County  Council.  In  the  winter  of  1900- 
190 1  an  unusually  heavy  snow  fall  broke  down  many 
The  Public  house-top  wires,  and  for  weeks  inter- 

Convenience  rupted  the  Company's  service  in  some  of 

the  most  important  business  centers  of  Metropolitan 
London.  Early  in  1901,  the  agent  of  the  Duke  of  Bed- 
ford's estate  demanded  such  heavy  payments  for  rights 
of  way  over  the  house-tops  of  the  estate,  that  the  Na- 
tional Telephone  Company  served  notice  on  all  of  the 
tenants  of  the  estate  that  it  would  discontinue  their 
telephone  service. 

In  February,  T901,  Mr.  J.  S.  Forbes,  Qiairman 
National  Telephone  Company,  expressed  himself  as 
follows :    "The  Company  had  to  live  with  their  com- 

'  The  Electrician;  May  4,   1900. 
18 


274        THE  TELEPHONE   IN   GREAT  BRITAIN 

petitors,  no  matter  how  indignant  they  might  feel  as 

to  the  manner  in  which  they  had  been  treated.     He 

beneved  that  no  body  of  men  could  have  been  more 

astonished   and  non-pkissed  than   were  the  directors 

at  the  treatment  the  Company  had  received  from  the 

Government.     The  Board   had   exhausted  argument, 

concihation,  offers  to  deal  on  the  square  with  the  Post 

Orifice,  to  act  with   them  in  friendly  competition,  to 

make  the  Company  auxiliary   to  them,   so  that  they 

might  not  rush  into  the  folly  of  spending  millions  of 

money  in  duplicating  the  telephone  service.     But  to  no 

avail."! 

In  November,  1901,  the  Post  Office  and  the  National 

Telephone  Company  finally  came  to  an  understanding. 

The  Company  consented  to  the  establishment  of  free 

intercommunication   between   its   subscribers   and  the 

Postmaster  General's  subscribers;   and  agreed  to  serve 

^^    .      ,  ^  ,         all  persons  without  favor  or  preference. 
National  Tele- 
phone Company     ^s  well  as  not  to  demand  of  subscribers 

grants  Intercom-  exceptional  facilities  for  the  carriage 
munication  »       .  ,.  .  -  ,    . 

01  wires  as  a  condition  of  supplying 

service.  Finally,  the  Company  bound  itself  to  charge 
rates  identical  with  those  of  the  Post  Office,  said  rates 
being  established  by  the  agreement  reached  in  1901. 

In  return,  the  Postmaster  General  agreed  to  provide 
underground  wires  for  the  Company,  if  he  saw  no 
objection  to  such  a  course,  on  the  merits  of  each  par- 
ticular case.     For  such  wires  the  Company  are  to  pay 

'  The  Times;  February  22,  1901. 


METROPOLITAN    LONDON    AGREEMENT       275 

rent  at  rates  specified  in  the  agreement.  At  the  expira- 
tion of  the  Company's  Hcense  in  December  31,  191 1, 
the  Postmaster  General  will  buy  the  Metropolitan  plant 
of  the  Company  at  its  value  in  situ,  that  is,  at  the  price 
of  reconstruction  less  allowance  for  any  imperfect  state 
of  repair  or  any  depreciation.  Provided,  that  the 
obligation  to  purchase  shall  extend  only  to  plant  in  ex- 
istence in  November,  1901,  or  subsequently  brought 
into  existence  and  constructed  in  accordance  with  the 
specifications  and  rules  set  forth  in  the  agreement. 
Provided  also,  that  the  Postmaster  General  shall  have  a 
certain  right  to  object  to  plant  as  not  being  suitable 
for  his  requirements,  any  difference  of  opinion  between 
him  and  the  Company  on  that  point  to  be  settled  by 
arbitration.^ 

The  schedule  of  rates  to  be  charged  by  the  Company 
and  the  Post  Office  established  a  tariff  for  unlimited 
service,  in  deference  to  public  opinion,  but  against  the 
judgment  of  the  Postmaster  General  and  the  National 
Telephone  Company.  It  was  $85  for  the  first  wire,  and 
$70  for  each  additional  wire.  The  National  Telephone 
Company's  charge  had  been,  on  an  annual  contract, 
$100  for  the  first  wire,  and  $75  for  each  additional 
wire;  on  a  five  year  contract,  $85  and  $62.25  respec- 
tively. The  agreement  also  established  the  measured 
service  charge  in  various  forms.  For  an  exclusive  line, 
it  was  $25  down,  and  2  cents  per  call  to  any  person 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  13  to  20,  Sir  Robert  Hunter,  Solicitor  to  Post 
Office. 


276        THE   TELEPHONE   IN   GREAT   BRITAIN 

within  the  County  of  London  [area  121  square  miles], 
and  4  cents  per  call  to  any  person  outside  the  County  of 
London  but  within  the  Metropolitan  area,  630  square 
miles.  To  subscribers  located  outside  London  County, 
the  charge  was  $20  down,  and  2  cents  per  call  to  a 
subscriber  on  the  same  exchange,  and  4  cents  per  call 
to  a  subscriber  on  any  other  exchange.  In  all  cases 
the  charges  for  calls  must  aggregate  at  least  $7.50  a 
year.^ 

In  March,  1899,  Mr.  Hanbury  had  held  out  to  the 
House  of  Commons  the  prospect  of  an  exclusive  line 
service  on  the  basis  of  about  $15  down,  with  a  pay- 
ment for  each  message." 

The  schedule  of  charges  established  by  the  agree- 
ment of  November,  1901,  greviously  disappointed  the 
people  who  for  years  had  kept  up  the  agitation  against 
the  National  Telephone  Company,  in  the  belief  that  it 
was  possible  to  supply  Metropolitan  London  with  tele- 
phone service  on  the  basis  of  a  charge  of  $50  a  year  for 
unlimited  service. 

On  January  o.'j,  1902,  Sir  Joseph  Dimsdale,  Lord 
Mayor  of  the  City  of  London,  in  the  House  of  Com- 

The  Commons  "^""^  ^^^^^  ^"""^  ^"  investigation  into 
accepts  the  the  desirability  of  suspending  the  agree- 

Agreement  ^^^^  between  the  Post  Office  and  the 

National  Telephone  Company.^     He  took  that  step  in 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  Appendix,  p.  247. 

'Hansard's  Parliamentary   Debates:   March    6,    1899,   p.    1388. 
'Hansard's  Parliatnentary  Debates;  January  27,  1902,  p.  992. 


METROPOLITAN    LONDON   AGREEMENT       277 

response  to  a  resolution  passed  by  a  conference  con- 
sisting of  delegates  from  all  the  municipalities  and 
local  authorities  comprised  within  the  Metropolitan 
London  telephone  area.  Sir  Joseph  Dimsdale's  mo- 
tion was  seconded  by  Mr.  Lough,  M.  P.  for  Islington, ' 
who  laid  stress  upon  the  fact  that  the  charge  for  un- 
limited user  was  $85. 

Mr.  Austen  Chamberlain,  Financial  Secretary  to 
Treasury,  replied  on  behalf  of  the  Government.  He 
said  that  the  Government  could  not  engage  in  cut- 
throat competition  in  London  for  the  purpose  of 
benefiting  6,000,000  people  in  Metropolitan  London 
at  the  expense  of  34,000,000  people  outside  of  London. 
Moreover,  if  the  war  had  gone  to  the  extreme,  the 
Post  Office  would  have  been  obliged  to  cancel  all  of  the 
Company's  way-leaves  across  the  railways,  and  that 
would  have  interrupted  the  whole  telephone  service 
of  Metropolitan  London.  He  added :  "Some  people 
talk  as  if  it  should  have  been  the  first  duty  [aim]  of  the 
Post  Office  to  crush  this  Company  out  of  existence,  or 
at  any  rate,  to  drive  it  out  of  the  London  area.  That 
is  not  our  conception  of  our  duty."  He  then  proceeded 
to  reply  to  the  statement  made  by  Mr.  J.  W.  Benn^  at 
a  meeting  of  the  London  County  Council,  to-wit,  that 
the  agreement  had  increased  by  $1,830,000  the  market 
value  of  the  Company's  shares.     He  said :   "Mr.  Benn 

^  Who's  Who,  1006  ;  Benn,  J.  W.,  Member  London  County  Council 
since  1889,  Vice  Chairman  in  1895-96,  and  Chairman  in  1904;  M.  P. 
in  1892,  and  since  1904;  contested  Deptford  in  1897,  and  Ber- 
mondsey  in   1900  ;    is  a  journalist. 


278        THE   TELEPHONE   IN   GREAT   BRITAIN 

was  good  enough  to  suggest  that  we  were  fools;  it 
was  left  to  a  reverend  gentleman  who  followed  him  to 
suggest  that  we  were  not  only  fools  but  knaves,  and 
that  although  he  did  not  like  to  suggest  felony,  our 
conduct  appeared  to  him  very  like  it.  I  am  not  pre- 
pared to  say  that  the  test  of  a  Stock  Exchange  quotation 
is  always  a  fair  test  of  valut;  ....  but  if  such  a  test 
is  to  be  taken,  let  it  at  least  be  administered  with  some 
degree  of  fairness.  The  full  terms  of  the  agreement 
were  not  before  the  public  until  the  first  of  December. 
By  the  second  week  in  December  the  shares  had  fallen 
again  to  3.5 ;  that  is  to  say,  when  the  full  terms  of  the 
agreement  came  to  be  known,  the  shares  were  lower 
than  they  were  after  the  Report  of  the  Select  Com- 
mittee of  1898;  lower  than  they  were  in  1899  when 
competition  was  officially  announced ;  lower  than  they 
were  in  1900  when  the  condition  of  the  streets  showed 
to  everybody  that  the  Post  Office  was  actually  prosecut- 
ing its  scheme;  lower  than  they  were  in  August  last 
when  the  Chairman  of  the  Company  first  announced 
that  a  satisfactory  agreement  had  been  come  to.  What- 
ever we  have  done,  we  have  not  appreciated  the  shares 
of  the  National  Telephone  Company." 

Sir  Joseph  Dimsdale's  Motion  was  lost;  and  the 
agreement  remained  in  force.  The  Post  Office  and  the 
National  Telephone  Company  divided  the  field ;  and 
thereafter  the  waste  arising  from  duplication  of  plant, 
and  still  more,  from  duplication  of  staff,  was  very 
greatly  reduced,  but  not  completely  eliminated;    com- 


METROPOLITAN    LONDON   AGREEMENT       279 

plete  elimination  being  impossible  under  the  best  con- 
ditions.^ In  the  spring  of  1906,  the  Post  Office  had 
32,879  telephones  in  use  in  Metropolitan  London, 
whereas  the  National  Telephone  Company  had  72,783 
telephones  in  use  in  March,  1905."  In  March,  1906, 
the  Post  Office  had  rented  to  the  National  Telephone 
Company  49,250  miles  of  wire  laid  in  underground 
conduits. 

Free  intercommunication  between  the  subscribers  to 
the  Post  Office  Telephone  Exchange  and  the  National 
Telephone  Company's  Metropolitan  London  Exchange 
was  established  in  the  spring  of  1902.  In  March,  1905, 
the  Company's  subscribers  outnumbered  the  Post 
Office's  subscribers  in  the  ratio  of  three  to  one.  Even 
at  the  present  writing,  January,  1907,  they  must  out- 
A  One-sided  number  them  by  more  than  two  to  one. 
Bargain  The  advantage  arising  from  intercom- 

munication, therefore,  has  been  preponderatingly,  if 
not  wholly,  on  the  side  of  the  Post  Office.  For  that 
advantage  the  Post  Office  has  given  the  National 
Telephone  Company  no  pecuniary  return  ;  in  fact  it  has 
given  it  no  return  whatever.  The  withdrawal  of  the 
Post  Office's  veto  upon  the  laying  of  underground 
pipes  by  the  Company,  merely  was  the  withdrawal  of  a 

'  Report  from  the  Select  Committee  on  Post  OfUce  (Telephone 
Agreement) .  1905;  q.  320  and  173  to  177,  Mr.  H.  Babington  Smith, 
Permanent   Secretary  to  Post  Office  since   1903. 

^Fifty-second  Report  of  the  Postmaster  General,  1906;  and  Re- 
port from  the  Select  Committee  on  Post  OfUce  (Telephone  Agree- 
ment), 1905 ;  Appendix,  p.  262. 


280        THE  TELEPHONE   IN   GREAT   BRITAIN 

veto  which  never  should  have  been  imposed.  More- 
over, that  withdrawal  was  of  no  advantage  to  the 
Company,  for  the  veto  of  the  London  County  Council 
still  remains  in  force.  For  the  underground  wires 
which  have  cost,  on  an  average  $85  per  mile  of  double 
wire,^  the  Company  pays  a  rental  of  $5  per  mile  of 
double  wire,  when  the  Company  assumes  the  cost  of 
maintenance,  and  $10  per  mile  when  the  Post  Office 
assumes  the  cost  of  maintenance.  Finally,  the  agree- 
ment of  the  Post  Office  to  buy  the  Company's  Metro- 
politan plant  at  its  value  in  situ  at  the  close  of  the  year 
J911,  is  an  agreement  to  buy  on  terms  much  more 
advantageous  to  the  Post  Office  than  to  the  Company. 
Therefore  neither  the  providing  of  underground  wires, 
nor  the  agreement  to  purchase  the  Company's  plant 
can  be  deemed  pecuniary  considerations  given  in  return 
for  the  great  commercial  advantage  of  free  intercom- 
munication. The  Government,  in  1901,  was  in  the 
position  to  exact  free  intercommunication  by  what  one 
almost  may  term  the  exercise  of  brute  force,  and  it 
hesitated  not  to  take  full  advantage  of  its  position  of 
advantage.  In  July,  1898,  Mr.  R.  W.  Hanbury,  Finan- 
cial Secretary  to  the  Treasury,  and  Representative  of 
Mr.  Hanbury's  ^'"^^  Postmaster  General  in  the  House  of 
Admission  Commons,  had  admitted  that  it  would 

be  unfair  to  demand  free  intercommunication  between 
two   telephone    systems   whose   respective   subscribers 

^Report    of    the   Postmaster   General   on    the   Post    Office,    1905. 


METROPOLITAN    LONDON   AGREEMENT       281 

were  in  the  ratio  of  three  to  one.^  Finally,  in  1905, 
a  Select  Committee  of  the  House  of  Commons  reported 
in  favor  of  the  granting  of  free  intercommunication 
to  such  municipal  telephone  exchanges  as  should  be 
established  in  the  years  1905  to  191 1.  The  Select 
Committee  was  asking  for  the  municipal  telephone  ex- 
changes in  question  no  more  than  the  Government  had 
taken  for  the  Post  Office.  But  the  Government  refused 
to  accept  the  Select  Committee's  recommendation,  Lord 
Stanley,  Postmaster  General,  saying :  "That  meant 
that  if  the  [National  Telephone]  Company  had  worked 
up  a  business  of,  say,  300  subscribers  in  a  town,  a 
municipality  entering  the  field  would  at  once  enjoy 
the  advantage  of  having  those  300  members,  not  indeed 
as  subscribers,  but  as  communicants.  He  thought  that 
a  most  unfair  condition,  and  he  was  not  surprised  that 
the  Company  would  not  agree  to  it."^ 

So  far  as  Metropolitan  London  is  concerned,  the 
Telegraph  Act,  1899,  was  abandoned  just  about  two 
years  after  it  had  been  enacted,  and  one  year  after  Mr. 
R.  W.  Hanbury  had  been  removed  from  his  position 
of  direct  control  over  the  Post  Office  by  his  promotion 
to  the  Presidency  of  the  Board  of  Agriculture.  In 
1898  and  1899,  Mr.  Hanbury  had  been  in  the  habit 
of  protesting  that  Parliament  would  enact  no  legislation 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  7520, 
Mr.  R.  W.  Hanbury,  Chairman,  examining  Mr.  W.  E.  L.  Gaine, 
General   Manager   National   Telephone   Company. 

'Hansard's  Parliamentary  Debates;  August  9,  1905. 


282        THE  TELEPHONE   IN   GREAT   BRITAIN 

that  would  give  the  National  Telephone  Company 
Mr.  Hanbury's  statutory  way-leaves ;  and  that  no  Post- 
Somersault  master  General  would  dare  to  override 

the  local  authorities  to  the  extent  of  laying  under- 
ground wires  for  the  National  Telephone  Company 
between  that  Company's  exchanges  and  its  subscribers' 
premises.  In  1902,  when  he  was  President  of  the 
Board  of  Agriculture,  and  was  face  to  face  with  the 
possibility  of  seeing  his  legislative  measure  end  in  a 
complete  fiasco,  he  supported  his  colleague,  the  Post- 
master General,  in  the  exercise  of  his  power  to  over- 
ride the  objections  of  every  local  authority  in  Metro- 
politan London,  which  had  an  area  of  634  square  miles. 
He  said  that  "if  the  Post  Office  had  gone  in  for  a  com- 
petition of  cutting  rates,  they  would  have  stood  a 
very  good  chance  of  being  beaten,  or  at  any  rate,  of 
having  to  carry  on  the  competition,  at  the  cost,  not  of 
the  people  of  London  alone,  but  of  the  taxpayers 
throughout  the  country.  ...  A  competition  of  cutting 
rates  would  have  been  carried  on  by  the  Post  Office 
at  a  great  disadvantage,  because  they  had  no  subscrib- 
ers, and  the  National  Telephone  Company  was  in  pos- 
session of  the  field."* 

So  far  as  Metropolitan  London  is  concerned,  the 
Telegraph  Act,  1899,  achieved  nothing  that  benefited 
the  public  and  was  at  the  same  time  fair  to  the  National 
Telephone  Company,  that  could  not  have  been  attained 

^Hansard's  Parliamentary  Debates;  January  27,  1902,  p.  1093, 
Mr.  Hanbury. 


METROPOLITAN    LONDON   AGREEMENT       283 

in  1899  by  means  of  friendly  negotiation  with  the 
National  Telephone  Company.  If  there  was  any  re- 
duction in  the  tariff  for  unlimited  service,  it  was  very 
Much  Ado  small  indeed.    As  for  the  establishment 

About  Nothing  of  the  measured  service,  the  National 
Telephone  Company  in  1899  would  have  welcomed 
any  action  of  the  Government  which  would  have  en- 
abled the  Company  to  establish  that  service  concom- 
itantly with  the  abolition  of  the  unlimited  service. 
As  for  the  Post  Office  establishing  the  unlimited  service 
alongside  of  the  limited  service,  that  action  was  taken 
for  reasons  of  political  expediency,  and  against  the 
business  sense  of  the  Post  Office.  It  was  not  an  action 
taken  in  the  public  interest  in  the  proper  sense  of  the 
word. 

Upon  the  question  whether  the  Company  would  have 
accepted,  in  1899,  the  measured  rates  established  in 
1901,  this  much  is  to  be  said:  In  March,  1906,  the 
Post  Office  Exchanges  had  not  yet  proved  that  those 
rates  were  remunerative.  In  1905-06,  with  90  per  cent, 
of  its  subscribers  on  the  measured  service,  the  Post 
Office  Exchanges  yielded  a  surplus  of  $50,000.  This 
small  surplus  was  shown  by  charging  to  depreciation 
a  sum  equal  to  three  per  cent,  on  the  capital  investment. 
That  allowance  was  very  small,  unless  the  progress  of 
invention  in  the  telephone  business  shall  prove  to  be 
very  much  slower  in  the  future  than  it  has  been  in  the 
past.  Again,  the  Post  Office  began  operations  in  1902, 
having  at  its  command  all  the  knowledge  acquired  at 


284        THE  TELEPHONE   IN   GREAT   BRITAIN 

great  cost  by  private  enterprise  in  the  course  of  some 
twenty-two  years.  A  private  company  which  had  sus- 
tained great  losses  through  unavoidable  mistakes  and 
Industrial  the  progress  of  invention,  and  had  not 

Pioneers'  Losses  yet  been  able  to  recover  fully  from  those 
losses,  could  not  equitably  be  asked  to  adopt  a  scale  of 
charges  that  would  barely  cover  expenses  when  made 
by  a  concern  starting  with  a  clean  sheet  in  1902.  The 
extent  of  the  losses  which  have  to  be  carried  by  pioneers 
in  industry,  is  illustrated  by  the  experience  of  the  New 
York  Telephone  Company  in  the  sixteen  years  ending 
with  December  31,  1904.  In  that  period  the  Com- 
pany's plant  was  practically  rebuilt  three  times.  At 
various  times  radical  improvements  were  made  in 
cables  and  in  switch-board  systems  which  involved 
the  abandonment  of  plant  by  no  means  unserviceable 
because  of  its  physical  condition.  Some  of  the  central 
stations  were  rebuilt  three  times  within  a  little  over 
ten  years.^ 

Upon  this  matter  of  the  losses  due  to  the  progress 
of  invention,  Mr.  John  Gavey,  Engineer-in-Chief  to 
Post  Office,  since  1902,  has  testified  as  follows:  "The 
ordinary  life,  putting  aside  the  possibility  of  replace- 
ment by  new  invention,  of  telephone  apparatus,  might 
be  taken  roughly  at  twenty  years ;  but  I  think  in  the 
past  the  actual  life  has  been  far  nearer  ten  or  fifteen 
years,  because  owing  to  the  progress  of  invention,  it 

*  Inquiry  info  Telephone  Service  and  the  Rates  in  New  York 
City,  by  the  Merchants'  Association  of  New  York,  June,  1905. 


METROPOLITAN    LONDON   AGREEMENT       285 

has  become  obsolete  before  it  has  been  worn  out."* 
Again,  it  must  be  remembered  that  the  National 
Telephone  Company  has  had  to  make  good  out  of  its 
current  revenue  not  only  the  losses  due  to  the  progress 
of  art  and  science,  but  also  the  losses  due  to  the  play  of 
national  and  municipal  politics.  The  twin-wire  system 
was  adopted  in  New  York  in  1887,  or  thereabout.^  In 
1887,  or  1888,  the  National  Telephone  Company  would 
have  introduced  that  system  in  Metropolitan  London, 
had  it  been  able  to  obtain  statutory  way-leaves.^  Again, 
as  soon  as  it  became  commercially  practicable  to  lay 
telephone  wires  underground,  the  National  Telephone 
Company  became  eager  to  put  its  wires  underground. 
But  down  to  November,  1901,  the  play  of  national  and 
municipal  politics  compelled  the  Company  to  string 
from  house-top  to  house-top  the  great  bulk  of  its  wires 
erected  in  Metropolitan  London.  The  entire  capital 
invested  in  house-top  wires  was  practically  thrown 
away,  since,  under  the  Agreement  of  1901,  the  Post 
Office  in  191 1  will  be  able  to  contend  successfully  that 
house-top  wires  are  not  suited  to  the  purposes  of  the 
Postmaster  General  and  need  not  be  purchased  by  the 
Post  Office. 

The  means  adopted  by  the  Government  to  secure  its 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),   1905  ;  q.   518. 

^Glasgow  Telephone  Inquiry,  1897;  q.  9451,  Mr.  H.  L.  Webb, 
Assistant   General    Manager   New   York   Telephone    Company. 

^Report  from  the  Select  Committee  on  Telegraphs  Bill.  1892; 
q.  369,  Mr.  J.  S.  Forbes,  Chairman  National  Telephone  Company. 


286       THE  TELEPHONE   IN   GREAT   BRITAIN 

unwarrantable  demand  for  intercommunication  between 
the  subscribers  to  the  National  Telephone  Company 
and  the  subscribers  to  the  proposed  Post  Office  Metro- 
politan London  Telephone  Exchanges,  were  charac- 
terized by  the  same  disregard  of  the 
umm   y  public   convenience   that   characterized 

the  telephone  policies  of  Glasgow,  the  City  of  London, 
the  London  County  Council,  and  the  Association  of 
Municipal  Corporations.  They  were  characterized  also 
by  the  same  disregard  of  the  niceties  of  the  demands 
of  rectitude  that  characterized  the  Select  Committee  of 
1898  when  it  recommended  all-round  competition  with 
the  National  Telephone  Company;  and  characterized 
the  Government  and  Parliament,  when  they  accepted 
the  Report  of  the  Select  Committee. 


CHAPTER    XVII 

THE   AGREEMENT    OF    1905 

The  Telegraph  Act,  1899,  proves  a  complete  failure  also  for 
that  part  of  the  United  Kingdom  known  as  the  Provinces;  and 
it  is  abandoned  in  February,  1905.  The  Post  Office  agrees  to 
purchase,  on  December  31,  191 1,  the  National  Telephone  Com- 
pany's plant.  That  arrangement  will  get  the  Company  out  of 
the  way,  in  191 1,  and  will  leave  Parliament  free  to  determine 
whether  the  local  service — as  distinguished  from  the  long  distance 
service — thenceforth  shall  be  conducted  by  the  Post  Office  or 
by  the  local  authorities.  The  agreement  is  referred  to  a  Select 
Committee  of  the  House  of  Commons,  which  Committee  makes 
two  recommendations  which  the  Government  declines  to  ac- 
cept, on  the  ground  that  they  would  be  respectively  "an  infringe- 
ment of  a  statutory  right"  and  a  "most  unfair"  action.  A  third 
recommendation  made  by  the  Committee,  if  it  had  been  carried 
out,  would  have  inflicted  upon  the  holders  of  the  securities  of 
the  National  Telephone  Company  even  more  serious  loss  than 
had  been  inflicted  by  the  Report  of  the  Select  Committee  on  Tele- 
phones, 1898,  and  the  Telegraph  Act,  1899.  The  agreement  of  1905 
will  leave  the  British  public  without  an  adequate  telephone 
service  until   December  31,    191 1. 

Early  in  1904,  the  Government  approached  the 
National  Telephone  Company  on  the  question  of  the 
purchase  of  the  Company's  provincial  plant;  but  the 
two  parties  found  themselves  so  far  apart  that  the  stage 
of  actual  negotiation  for  purchase  was  not  reached.^ 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  215,  Mr.  H.  B.  Smith,  Permanent  Secretary 
to  Post  Office. 

287 


288        THE  TELEPHONE   IN   GREAT   BRITAIN 

The  year  1904  was  allowed  to  pass  without  the  Gov- 
ernment taking  advantage  of  its  last  opportunity  to 
compel  the  Company  to  sell  at  a  price  fixed  by  arbitra- 
tion on  the  basis  of  present  earnings  and  future  pros- 
pects. 

Early  in  1905,  the  Government  considered  how  it 
should  meet  the  situation  that  would  arise  on  Decem- 
ber 31,  191 1,  with  the  expiry  of  the  Company's  license. 
So  far  as  Metropolitan  London  was  concerned,  the 
problem  had  been  settled  by  the  Agreement  of  Novem- 
ber, 1901.  As  for  the  rest  of  the  United  Kingdom, 
the  so-called  provinces,  the  situation  was  as  follows. 
For  six  years  some  1300  local  authorities  had  been  at 
liberty  to  engage  in  competition  with  the  National 
Complete  Failure  Telephone  Company  on  the  basis  of 
of  Telegraph  licenses  running  not  to  exceed  twenty- 
Act,  1899  ^^,g  years.^     Six  cities  had  established 

municipal  telephone  exchanges;  and  of  those,  one  had 
sold  out  to  the  National  Telephone  Company  after  two 
and  one-half  years  of  competition.  Of  the  remaining 
five  cities,  Glasgow  alone  had  succeeded  in  establishing 
an  exchange  of  any  proportions;  and  the  indications 
were  that  even  Glasgow  had  been  "beaten  to  a  stand- 
still."^  Seven  other  cities  had  taken  out  licenses  in  the 
period  from  September,  1900,  to  December,  1902;  but 

^Compare  Hansard's  Parliamentary  Debates;  June  29,  1903,  Mr. 
Austen  Chamberlain,  Postmaster  General. 

^  Telephones  in  use  in  Glasgow : 

1903               1904              1905  1906 

Municipal  plant 9,123            12,032            12,362  12,821 

Company  plant 16,471            22,227  29,908 


THE  AGREEMENT  OF  1905  289 

none  had  made  any  preparations  whatever  to  supply 
service.  In  short,  in  1905,  the  National  Telephone 
Company  held  90  per  cent,  of  the  business  outside  of 
Metropolitan  London  ;^  and  there  was  no  prospect  of 
any  material  modification  of  that  situation  in  the  course 
of  the  next  six  years.^  In  other  words,  the  Telegraph 
Act,  1899,  had  failed  completely  to  achieve  Mr.  Han- 
bury's  most  cherished  wish,  to-wit,  the  establishment  of 
a  system  of  municipal  telephone  exchanges  which,  in 
the  transitional  period  from  1905  to  191 1,  should  make 
the  public  as  well  as  the  Government  entirely  inde- 
pendent of  the  National  Telephone  Company. 

When  the  complete  failure  of  the  policy  of  munici- 
pal competition  had  been  established  beyond  the  possi- 
bility of  controversy,  the  Government  became  alarmed 
lest  it  should  find  itself  in  191 1  in  the  position  of  a 
"forced  buyer"  of  the  National  Telephone  Company's 
provincial  plant  f  for  it  was  obvious  that  the  provincial 
telephone  service  could  not  be  permitted  to  come  to  a 
stand-still  on  January  i,  19 12.  Two  courses,  there- 
fore, presented  themselves  to  the  Government  in  1905  : 
to  make  arrangements  for  the  purchase  of  the  Com- 
pany's provincial  plant  in   191 1,  on  terms  similar  to 

*  Telephones  in  use  outside  of  Metropolitan  London : 

Post    Office 1 0,380 

Municipalities     19,000 

National  Telephone  Company....    252,000 
^Report   from   the  Select   Committee   on   Post   Office   (.Telephone 
Agreement),   1905;  q.  2100  and  2101,  Mr.  H.  B.   Smith,    Permanent 
Secretary  to  Post  Office. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement) ,  1905  ;  q.  212,  281,  283,  2100  and  2101,  Mr.  H.  B.  Smith, 
Permanent  Secretary  to  Post  Office. 

19 


290        THE   TELEPHONE   IN   GREAT   BRITAIN 

those  made  in  November,  1901,  for  the  purchase  of  the 
MetropoHtan  London  plant;  or,  to  estabHsh  before 
19 12  a  provincial  Post  Office  telephone  system  capable 
of  taking  over,  on  January  i,  1912,  all  of  the  National 
Telephone  Company's  subscribers. 

To  the  plan  of  duplicating  the  Company's  provincial 
plant  there  were  serious  objections.  The  construction 
of  a  duplicate  system  would  i!ivolve  an  enormous  waste 
Duplication  through    the    throwing    aside    of    the 

Impracticable  Company's  plant ;  moreover,  it  could  be 
achieved  before  January  i,  19 12,  only  by  working  un- 
der "extreme  pressure,"  and,  therefore,  at  abnormal 
cost.  Indeed,  Mr.  Gavey,  Engineer-in-Chief  to  Post 
Office,  was  not  perfectly  sure  that  it  could  be  achieved 
at  all  before  January  i,  1912.^  Again,  Sir  Robert 
Hunter,  Solicitor  to  Post  Office  since  1882,  speaking 
from  past  experience,  expressed  grave  doubt  as  to  the 
Post  Office  being  able  to  obtain  the  way-leaves  requisite 
for  the  duplication  of  the  Company's  provincial  plant. 
He  said  the  local  authorities  were  becoming  more  and 
more  reluctant  to  give  the  Post  Office  way-leaves,  for 
the  National  Telephone  Company  had  established  the 
practice  of  paying  for  way-leaves,  which  practice  the 
Post  Office  had  refused  to  follow.  If  the  Post  Office 
should  enforce,  through  appeal  to  the  courts,  its  statu- 
tory power  to  take  way-leaves  without  paying  the  local 
authorities,  and  should  tear  up  the  streets  for  the  pur- 


*  Report  from   the  Select  Committee  on  Post   Office   (Telephone 
Agreement),  1905  ;  q.  387,  423  and  436. 


THE  AGREEMENT  OF  1905  291 

pose  of  laying  pipes  which  were  not  to  be  used  for 
some  years  to  come,  "ParHamentary  pressure  would  be 
brought  upon  the  Post  Office  not  to  proceed."^ 

Under  the  foregoing  circumstances  the  Post  Office 
made  an  agreement  with  the  National  Telephone  Com- 
pany for  the  purchase  of  its  provincial  plant  in  191 1, 
said  agreement  being  essentially  a  duplicate  of  the 
London  Agreement  of  November,  1901.  But  before 
taking  up  that  agreement,  it  is  necessary  to  speak  of 
Investment  °"^  further  fact  that  made  it  necessary 

under  Expiring  for  the  Government  to  make  immedi- 
Franchtses  ^^.^jy    ^^    arrangement   of   some   kind 

with  the  National  Telephone  Company.  That  fact  was 
the  unwillingness,  and,  in  part,  the  inability  of  the 
Company  to  make  further  investments  on  the  strength 
of  a  license  which  would  expire  in  191 1,  with  no  pro- 
vision as  to  what  would  become  of  the  Company's 
provincial  plant,  and  with  provision  of  uncertain  finan- 
cial outcome  for  the  Company's  Metropolitan  London 
plant.  The  situation  had  been  summed  up  by  Sir 
Henry  H.  Fowler,  Chairman  National  Telephone  Com- 
pany, at  the  Company's  annual  meeting  in  February, 
1904.^  Sir  H.  H.  Fowler  had  said  that  the  conditions 
under  which  the  Company  was  doing  its  work,  with 
each  succeeding  year  made  it  increasingly  difficult  to 
raise  further  capital  on  remunerative  terms.  On  the 
other  hand,  every  additional  subscriber  meant  a  further 

*  Report  from   the   Select  Committee   on  Post   OtHce   (Telephone 
Agreement),  1905  ;  q.  2040  and  2041,  and  Appendix,  p.  256. 
'The  Economist ;  March  26,   1904. 


292        THE  TELEPHONE   IN   GREAT   BRITAIN 

investment  of  capital.  The  alternative  to  further  large 
capital  expenditure  was  the  deplorable  policy  of  deny- 
ing service  to  would-be  subscribers.  He  had  added 
that  at  that  moment  there  were  waiting  for  service 
some  3,300  people  in  Metropolitan  London,  and  some 
7,700  people  in  the  provinces. 

When  Sir  H.  H.  Fowler  made  the  foregoing  state- 
ment, the  capitalization  of  the  Company  was  $45,872,- 
910.  That  capitalization  represented  an  investment  of 
$39,412,910  in  plant  and  patent  rights;  the  remaining 
$6,460,000  representing  "water"  injected  in  the  course 
of  the  amalgamations  brought  to  a  close  in  1890.  But 
since  1890,  the  Company  had  invested  in  plant,  undis- 
tributed earnings  aggregating  $8,092,050,  and  not 
represented  by  any  outstanding  securities.  Further- 
more, it  had  charged  to  operating  expenses  the  whole 
cost  of  replacing  with  twin  wires,  or  the  metallic  cir- 
cuit, the  single-wire  plant  erected  previously  to  1892.^ 
In  other  words,  the  "water"  had  been  more  than  elim- 
inated; and  the  plant  as  a  whole  had  been  made  to 
embody  fairly  well  the  best  American  telephone  prac- 
tice, the  General  Manager  and  his  leading  officials  hav- 
ing visited  the  United  States  three  times  in  the  last 
six  years.  And  yet,  in  March,  1904,  the  market  value 
of  the  securities  of  the  National  Telephone  Company 
had  been  only  $43,887,500,  or  95.67  per  cent,  of  the 


'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  536  to  553,  1655,  1759  and  1760,  Mr.  W.  E.  L. 
laine,   General   Manager  National  Telephone   Company. 


THE  AGREEMENT  OF  1905  293 

face  valiie.^  So  far  as  the  public  demand  for  telephone 
services  was  concerned,  the  opportunity  for  the  profit- 
able investment  of  capital  in  telephone  plant  never  had 
been  so  good  as  it  was  in  1904.  But  the  peculiar  con- 
ditions created  by  the  play  of  national  politics  and 
municipal  politics  had  so  impaired  the  credit  of  the 
National  Telephone  Company,  that  the  Company,  early 
in  1904,  had  been  obliged  to  issue  four  per  cent,  deben- 
ture stock  at  95. 

Before  the  Select  Committee  of  1905,  Mr.  W.  E.  L. 
Gaine,  General  Manager  National  Telephone  Company, 
testified  that  during  the  past  few  years  he  had  con- 
stantly called  the  attention  of  the  Postmaster  General, 
through  the  Secretary  to  the  Post  Office,  to  the  grow- 
ing difficulty  of  raising  "upon  fair,  reasonable  and  com- 
mercial terms,  the  very  large  amount  of  capital  con- 
stantly required  to  be  poured  into  the  business."  He 
added  that  in  the  next  few  years  upward  of  $50,000,000 
ought  to  be  spent  upon  the  telephone  service.  The 
witness  added  that  in  the  past  three  years  the  Ameri- 
can Telephone  and  Telegraph  Company,  in  the  United 
States,  had  invested  an  average  of  $40,000,000  a  year ; 

^  The  Economist;  March  26,  1904. 

First    preference   shares,   6    per    cent 
Second  preference  shares,  6  per  cent. 
Third  preference  shares,   5   per  cent 
Preferred    shares,    6    per    cent. 
Deferred  shares,   5   per   cent. 
Debenture  shares,   3^   per  cent. 
Debenture    shares,    4    per   cent. 

Grand     total 


Par  value 
$ 

750,000 

Market  value 

$ 

1,012,500 

:.       750,000 

1,050,000 

6,250,000 

6,250,000 

9,916,665 
9.833,335 

10,015,000 
5,860,000 

10,000,000 

9,500,000 

8,372,910 

8,200,000 

45,872,910 

43.887,500 

294        THE   TELEPHONE    IN   GREAT   BRITAIN 

and  that  in  the  year  1905,  it  would  invest  upward  of 
$50,000,000.^ 

At  the  same  time,  the  Permanent  Secretary  to  the 
Post  Office,  Mr.  H.  B.  Smith,  stated  that  it  soon  would 
become  impossible  for  the  Company  to  raise  further 
capital  for  expenditure  upon  "plant  which  they  would 
have  no  security  for  selling  at  the  end  of  their  term."^ 

Under  the  foregoing  circumstances,  the  Postmaster 
General  on  February  2,  1905,  entered  into  the  follow- 
ing Agreement  with  the  National  Telephone  Company 
for  the  purchase,  in  191 1,  of  the  plant 
g  n  n  outside  of  Metropolitan  London.  The 
Postmaster  General  agreed  to  purchase  all  plant,  land 
and  buildings  of  the  Company  brought  into  use  with 
the  sanction  of  the  Postmaster  General  and  in  use  by 
the  Company  on  December  31,  191 1.  The  phrase: 
"brought  into  use  with  the  sanction  of  the  Postmaster 
General,"  means :  in  use  at  the  date  of  the  Agreement, 
or  constructed  after  that  date  in  accordance  with  the 
specifications  and  rules  set  forth  in  the  Agreement, 
Provided,  however,  that  the  Postmaster  General  may 
object  to  take  over  any  plant  on  the  ground  that  it  Is 
not  suited  to  his  requirements,  or  may  take  it  over  at  a 
price  reduced  so  as  to  correspond  to  such  unsuitability. 
In  both  cases  the  question  of  suitability  is  to  be  left  to 
the   Railway   and   Canal    Commission   as   arbitrators. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  552  and  553. 

'Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),   1905  ;  q.  213. 


THE  AGREEMENT  OF  1905  295 

The  foregoing  proviso  was  inserted  mainly  for  the 
purpose  of  enabhng  the  Postmaster  General  to  pick  and 
choose  between  Company  plant  and  municipal  plant  in 
those  areas  in  which  the  municipalities  had  established 
telephone  exchanges.^ 

The  price  is  to  be  fixed  by  the  Railway  and  Canal 
Commission  as  arbitrators,  on  the  basis  of  cost  of  re- 
placement, with  allowance  for  depreciation  due  to  wear, 
imperfect  state  of  repair,  the  introduction  of  new 
methods  of  working,  or,  to  further  inventions.  No 
allowance  shall  be  made  for  compulsory  sale,  or  good- 
will, or  any  profits  which  the  Company  might  have 
made  by  the  continued  use  of  such  plant. 

In  those  cases  in  which  the  National  Telephone  Com- 
pany's license  has  been  extended  beyond  191 1,  to-wit, 
Glasgow  (1913),  Swansea  (1920),  Brighton  (1926) 
and  Portsmouth  (1926),  the  Postmaster  General  will 
buy,  with  allowance  for  good-will,  the  unexpired  license 
of  the  Company.  The  value  of  the  good-will  is  to  be 
fixed  by  arbitration. 

The  Postmaster  General  agreed  also  to  buy  the  so- 
called  private  wire  plant  of  the  Company,  which  con- 
sists of  wires  connecting  premises  occupied  or  used  by 
one  person  or  firm.  Such  wires  are  not  used  by  the 
general  body  of  subscribers ;  they  are  for  private  use  as 
distinguished  from  public  use ;  and  therefore  the  trans- 
mission of  messages  by  means  of  them  is  no  infringe- 

*  Report  from  the  Select  Committee  on  Post  Office  (TelcpJwne 
Agreement),  1905;  q.  2171,  Mr.  H.  B.  Smith,  Permanent  Secretary 
to  Post  Office. 


206        THE   TELEPHONE   IN   GREAT   BRITAIN 

nient  of  the  Postmaster  General's  monopoly.  For  the 
private  wire  plant  the  Postmaster  General  agreed  to 
pay  structural  value,  plus  an  allowance  for  good-will 
equivalent  to  three  times  the  average  annual  net  profits 
obtained  in  the  three  years  ending  with  December  31, 
1911. 

The  Postmaster  General  agreed  also  to  lay  under- 
ground wires  for  the  National  Telephone  Company  in 
any  local  area  in  which  the  Company  was  operating,  at 
an  annual  rental  of  $5  per  mile  of  double  wire.  Pro- 
vided, however,  that  the  Postmaster  General  should 
have  the  right  to  refuse  to  supply  such  works,  if  he 
thought  they  were  unnecessary,  or  likely  to  be  unsuited 
to  his  requirements  after  191 1,  or  inconsistent  with  fair 
competition.  Under  the  latter  proviso  against  unfair 
competition,  the  Postmaster  General  has  assured  the 
municipalities  that  he  will  not,  without  the  consent  of 
the  municipality  concerned,  lay  underground  wires  for 
the  National  Telephone  Company  in  areas  in  which 
municipalities  have  established  exchanges.^ 

The  National  Telephone  Company  in  turn  relin- 
quished its  power  to  show  favor  and  grant  preference, 
and  accepted  the  maximum  and  minimum  charges  es- 
tablished by  the  Postmaster  General  and  embodied  in 
the  Agreement;  provided,  that  the  Company  might 
retain  its  then   charges   wherever  they  exceeded  the 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  i  q.  2138,  Mr.  H.  B.  Smith,  Permanent  Secretary 
to  Post  Office;  q.  77  and  2013,  Sir  Robert  Hunter,  Solicitor  to  Post 
Office, 


THE  AGREEMENT  OF  1905  297 

maxima,  or  fell  below  the  minima,  fixed  by  the  Post- 
master General. 

The  Company  also  agreed  to  grant  free  intercom-, 
munication  between  its  subscribers  and  the  Postmaster 
General's  subscribers,  wherever  the  Postmaster  General 
had  established,  or  should  establish,  a  telephone  ex- 
change; as  well  as  to  adopt  a  scale  of  charges  which 
should  be  binding  also  upon  the  competing  Post  Office 
exchange,  and  should  be  fixed  either  by  agreement  be- 
tween the  Company  and  the  Post  Office,  or,  by  the 
Treasury  as  arbitrator. 

If  at  any  time  representations  are  made  to  the  Post- 
master General  that  the  Company  is  giving  an  ineffi- 
cient service  in  any  exchange  area,  and  upon  inquiry 
by  a  referee  appointed  by  the  Board  of  Trade  it  shall 
be  ascertained  by  the  award  of  such  referee  that  the 
Company's  service  in  such  area  is  inefficient,  and  that 
such  inefficiency  is  not  caused  by  the  unreasonable 
withholding  of  way-leaves  by  any  local  authority,  it 
shall  be  lawful  for  the  Postmaster  General  at  his  option 
either  to  require  the  Company  to  take  such  steps  as  he 
may  deem  necessary  to  render  the  service  efficient,  or 
to  call  upon  the  Company  to  sell  to  him  the  plant  used 
by  it  in  such  exchange  area.  In  the  first  case,  if  the 
Company  make  default  in  complying  with  the  Post- 
master General's  requirements,  and  in  the  second  case 
forthwith,  the  Company  shall  sell  to  the  Postmaster 
General  all  the  plant  in  the  area  in  question  at  struc- 
tural value,  with  no  allowance  for  good-will,  etc.    The 


298        THE  TELEPHONE   IN   GREAT   BRITAIN 

foregoing  provision  against  inefficient  service  on  the 
part  of  the  Company,  the  Postmaster  General  estab- 
lished because  he  had  resolved  to  grant  no  further 
licenses  to  local  authorities;  as  well  as  to  try  to  per- 
suade the  muntcipalities  that  had  estsblished  telephone 
exchanges  to  sell  their  plants  either  to  himself  or  to 
the  National  Telephone  Company.  The  Postmaster 
General's  resolve  was  based  upon  the  desire  to  avoid 
the  waste  of  capital  that  would  result  from  further 
duplication  of  plant  in  the  competitive  areas.* 

The  Agreement  between  the  Postmaster  General 
and  the  National  Telephone  Company  was  signed  on 
February  2,  1905,  subject  to  the  proviso  that  it  should 
The  Select  ^lot  take  effect  if  either  House  of  Par- 

Committce,  1905  Hament  should  pass  a  resolution  against 
it  before  August  31,  1905.  In  the  following  May,  the 
House  of  Commons  appointed  a  Select  Committee  to 
report  upon  the  Agreement.  Before  the  Select  Com- 
mittee, Sir  Robert  Hunter,  Solicitor  to  Post  Office; 
Mr.  H.  Babington  Smith,  Permanent  Secretary  to  Post 
Office;  and  Sir  George  Murray,  Permanent  Secretary 
to  Treasury,  testified  that  the  Agreement  would  get 
the  National  Telephone  Company  out  of  the  way  in 
191 1,  and  would  leave  Parliament  free  to  decide 
whether  the  local  telephone  service,  as  distinguished 
from  the  trunk  line  service,  should  be  retained  by  the 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  789  to  793,  Mr.  D.  M.  Stevenson,  submitting 
a  letter  of  the   Postmaster  General,   Lord   Stanley. 


THE  AGREEMENT  OF  1905  299 

Postmaster  General,  or  should  be  sold  to  the  several 
local  authorities.^ 

Mr.  W.  E.  L.  Gaine,  General  Manager  National 
Telephone  Company,  testified  as  follows :  "In  the  view 
of  the  Board  of  the  Company  I  feel  bound  to  say  that 
we  think  the  Postmaster  General  has  driven  a  very  hard 

bargain,  and  I  am  justified,  I  think,  in 

A  Hard  Bargain  .         -       ,1  •  i.      4.     ^1     4.    -r  1     • 

gomg  to  this  extent,  that  if  each  in- 
dividual member  of  the  Board  had  been  dealing  with 
his  own  money  [property]  and  not  acting  in  a  fiduciary 
capacity,  he  would  have  hesitated  to  accept  the  bar- 
gain ....  In  the  view  of  the  Board  the  bargain  is  a  hard 
one  because  it  gives  no  consideration  in  respect  of  the 
good-will  of  the  great  business,  with  its  present  gross 
income  of  over  $10,000,000,  and  its  net  revenue  of  over 
$3,750,000  per  annum,  which  the  Company  has  built 
up.  The  Company  has  had  to  pay  for  all  the  experi- 
ments and  mistakes  which  are  inherent  in  the  launch- 
ing and  development  of  any  new  industry.  It  has  paid 
the  Post  Office  in  royalties  already  $9,240,000,^  and  the 
Post  Office  under  this  Agreement  is  going  to  step  into 
the  business  in  191 1  by  merely  paying  for  the  plant 
employed  in  it."^ 

^Report  from  the  Select  Committee  on  Post  OfUce  (Telephone 
Agreement),   1905  ;  q.   1996,  2099  and   1931. 

^  At  the  close  of  the  year  1904,  the  Company  had  paid  in  divi- 
dends on  its  ordinary  shares  the  sum  of  $13,460,000;  and  in  divi- 
dends and  interest  upon  its  preference  shares  and  debenture  stocks 
the  sum  of  $9,700,000.  In  addition  it  had  accumulated  a  reserve 
fund  of  $8,090,000.  Report  from  the  Select  Committee  on  Post 
Office  (Telephone  Agreement) ,  1905  ;  p.  248  to  250. 

^Report  from  the  Select  Committee  on  Post  Office  (^Telephone 
Agreement),  1905  ;  q.  554  to  560. 


300        THE   TELEPHONE    IN    GREAT   BRITAIN 

Sir  Wollaston  Knocker,  Town  Clerk  of  Dover,  and 
representative  of  the  Association  of  Municipal  Corpor- 
ations, testified  that  the  Association  approved  the  pro- 
posal of  the  Government  to  purchase,  "under  the  belief" 
that  the  State  would  reduce  the  local  telephone  charges.^ 
On  the  other  hand,  the  representatives  of  the  munici- 
palities that  had  established  telephone  exchanges,  to- 
gether with  the  representatives  of  the  City  of  London 
Demand  of  Tele-  ^"^  ^^^  London  County  Council,^  pro- 
phone-owning  tested  against  the  proposed  national- 
Municipaluics        -^^^-^^  ^^  ^j^^  j^^^l  telephone  services. 

Their  leading  spokesman,  Mr.  D.  M.  Stevenson, 
Subconvener  of  the  Glasgow  Telephone  Committee, 
argued  that  the  rates  charged  by  the  City  of  Glasgow 
proved  that  the  tariffs  of  the  National  Telephone  Com- 
pany as  well  as  of  the  Post  Office  Telephone  Exchanges 
were  much  too  high.  He  asked  that  the  State  acquire 
the  property  of  the  National  Telephone  Company  on 
"replacement"  terms,  and  then  delegate  to  the  local 
authorities  the  conduct  of  the  local  telephone  services. 
Should  the  State  retain  the  conduct  of  the  local  serv- 
ices, the  excessive  profits  hitherto  made  by  the  Com- 
pany, would  be  retained  by  the  State.^  Mr.  A.  C. 
Morton,  Chairman  of  the  Streets  Committee  of  the 
City  of  London,  said:  "We  have  always  come  to  the 
conclusion,  after  considering  the  best  advice  we  could 

'  Report  from  the  Select  Committee  on  Post  OfRce  (Telephone 
Agreement),  1905;  q.  1386,  1387  and  1407. 

-Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  785  to  788,  889  and  897,  Mr.  D.  M.  Stevenson. 


THE  AGREEMENT  OF  1905  301 

take,  that  for  an  unlimited  service  in  [Metropolitan] 
London,  the  charge  should  not  be  more  than  $50  a 
year;  and  we  consider  that  if  the  Corporation  of  Glas- 
gow can  give  an  unlimited  service  for  their  area  for 
$26.25,  it  ought  to  be  done  for  $50  in  London."^  Mr. 
H.  E,  Haward,  Comptroller  London  County  Council, 
stated  that  the  County  Council  had  been  particularly 
London  County  disturbed  by  the  statement  made  by 
Council  is  Mr.  W.  E.  L.  Gaine,  General  Manager 

"Disturbed"  National  Telephone  Company,  that  he 

hoped  that  the  holders  of  the  Company's  ordinary 
shares  would  obtain  the  par  value  of  their  shares  in 
191 1.  He  stated  that  the  debenture  stock  and  the 
preference  shares  must  be  redeemed  in  191 1  at  pre- 
miums ranging  from  three  per  cent,  to  five  per  cent., 
and  aggregating  $1,218,225.  In  order  that  the  hold- 
ers of  the  ordinary  shares  might  receive  par  value  in 
191 1,  the  State  would  have  to  pay  the  Company 
$1,218,225  in  excess  of  the  total  of  outstanding  securi- 
ties; and  such  payment  would  diminish  the  probability 
of  the  Post  Office  being  able  substantially  to  reduce  the 
telephone  charges.^ 

When  Mr.  Haward  made  the  following  argument, 
the  National  Telephone  Company  had  spent  $56,617,- 
765  upon  plant,  patent  rights  and  the  purchase  of 
various    subsidiary    and    competing    companies.     The 

*  Report  from  the  Select  Committee  on  Post  OfUce  (Telephone 
Agreement).  1905;  q.  1578  to  1590,  Mr.  A.  C.  Morton. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  1437  to   1461,  Mr.  Haward. 


302        THE  TELEPHONE   IN   GREAT   BRITAIN 

patent  rights  had  cost  $1,500,000;  the  purchase  of 
subsidiary  and  competing  companies  effected  previous 
to  and  in  1890,  had  resulted  in  the  injection  of  $6,460,- 
000  of  "water";  and  the  shares  of  the  New  Telephone 
Company,  purchased  in  1892,  had  cost  $2,199,480. 
Assuming,  with  the  critics  of  the  National  Telephone 
Company,  that  the  sum  paid  for  the  patent  rights  must 
be  classed  as  "water,"  since  those  rights  have  expired ; 
and  assuming,  furthermore,  that  the  purchase  of  the 
New  Telephone  Company  shares  brought  the  National 
Telephone  Company  no  tangible  property  whatever, 
one  gets  an  aggregate  of  $10,159,480  of  "water."  On 
the  foregoing  assumptions,  the  National  Telephone 
Company,  in  March,  1905,  had  spent  $46,458,285  upon 
plant  in  the  strictest  sense  of  that  word.  Against  that 
investment  in  plant  there  were  outstanding,  securities 
aggregating  $45,992,965.^  At  the  time  when  Mr. 
Haward  made  his  argument,  there  was,  therefore,  a  net 
balance  of  $465,300  to  meet  the  sum  of  $1,218,225 
which  would  have  to  be  paid  as  premiums  in  191 1, 
before  the  ordinary  shares  could  be  cancelled.  That 
balance,  however,  was  increasing  at  the  rate  of  $900,- 
000  a  year,  through  the  Company's  practice  of  invest- 
ing each  year  in  plant  a  certain  amount  of  undivided 
earnings,  such  investment  not  being  accompanied  by 
the  issue  of  securities.  In  fact,  by  July,  1906,  the 
balance  available  for  meeting  Mr.  Haward's  $1,218,225 
already  had  become  $2,561,000,  through  the  increase 

Garcke:     Manual  of  Electrical  Undertakings,  1906. 


THE  AGREEMENT  OF  1905  303 

of  the  Company's  reserve  fund  from  $8,233,660  in 
June,  1905,  to  $10,329,715  in  July,  1906.^  Mr.  Ha- 
ward's  protest  against  the  Company  receiving  in  191 1 
a  sum  sufficient  to  enable  it  to  pay  the  holders  of  its 
preferred  shares,  premiums  aggregating  $1,218,225, 
therefore,  in  fact,  was  a  protest  against  the  Company 
being  paid  even  a  sum  which  would  be  materially  less 
than  the  actual  money  cost  of  the  plant  which  the  Post 
Office  would  receive  on  January  i,  1912.  The  modern 
character  of  that  plant  was  indicated  in  Mr.  Gaine's 
statements  that  in  November,  1904,  the  average  age  of 
the  entire  plant  had  been  only  four  years;  and  that  he 
hoped  that  the  replacement  of  worn  out  and  antiquated 
plant  would  go  on  at  such  a  rate  that  at  the  end  of  191 1 
the  average  age  of  the  entire  plant  would  be  somewhat 
less  than  four  years.^ 

Mr.  Thomas  Munro,  Clerk  to  the  County  Council  of 
Lanark,  appeared  before  the  Select  Committee  of  1905 
in  order  to  protest  against  the  announcement  made  by 
the  Postmaster  General,  that  if  the  Post  Office  should 
assume  the  local  telephone  business  in  191 1,  it  would 
discontinue  any  payments,  either  in  money  or  by  way 
of  cheap  service,  hitherto  made  by  the  National  Com- 
pany to  the  local  authorities  in  consideration  of  way- 
leaves  on  public  roads  and  streets.  Mr.  Munro  stated 
that  for  the  privilege  of  erecting  poles  in  the  roads  of 

^  The  Electrical  Reviezv ;  July  27,  igo6. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement).  1905;  q.  544  to  547,  582  to  589,  and  601,  Mr.  W.  E. 
L.   Gaine,   General   Manager  National   Telephone   Company, 


304         THE   TELEPHONE   IN    GREAT   BRITAIN 

Lanark  County,  the  Company  was  paying  $750  a  year 
in  cash,  and  $450  to  $500  in  the  form  of  reduced  rates 
to  the  police  and  other  local  government  departments. 
Mr.  Munro  added :  "Our  agreement  is  that  at  any  time 
we  can  call  on  the  National  Telephone  Company  to  re- 
move their  poles,  and  I  do  not  know  whether  the  Post 
Office  have  considered  the  very  serious  power  that  has 
thereby  been  conferrd  upon  the  local  authorities;  be- 
cause, assuming  any  local  authority  choose  to  take  up 
that  attitude  [toward  the  Post  Office]  in  19 10,  they 
might  call  on  the  National  Telephone  Company  to  re- 
move all  their  poles,  which  is  a  very  serious  matter. 
I  do  not  suggest  that  as  a  possible  contingency,  but  I 
do  mention  it  as  showing  the  power  of  the  local  au- 
thorities in  this  matter "^ 

Finally,  Mr.  D.  M.  Stevenson,  Subconvener  of  the 
Glasgow  Telephone  Committee,  appeared  before  the 
Select  Committee  in  order  to  request  the  Government  to 
adopt  a  policy  which  Sir  Robert  Hunter,  Solicitor  to 

Glasgow  demands  ^^^  ^^^^  ^^^^'  denominated  a  breach 
Breach  of  Parlia-  of  the  "Parliamentary  contract"  made 
mentary  Contract  between  the  Government  and  the  Na- 
tional Telephone  Company  while  the  Bill  of  1899  was 
before  Parliament.  Upon  that  occasion  the  Company 
had  agreed  to  establish  intercommunication  on  certain 
terms ;  to  givt  up  the  right  to  exercise  favor  or  prefer- 
ence; and  to  keep  Its  charges  within  the  maxima  and 


^Report  from   the  Select  Committee   on  Post  Office   (Telephone 
Agreement),  1905  ;    q.  1529  to  1539,  and  p.  256. 


THE  AGREEMENT  OF  1905  305 

minima  to  be  prescribed  by  the  Postmaster  General. 
In  return,  the  Government  had  inserted  in  the  Bill,  and 
Parliament  had  accepted,  a  clause  giving  the  Company 
the  right  to  demand  that  its  license  be  made  concurrent 
with  that  of  the  municipality,  in  any  case  in  which  a 
municipality  should  take  a  license  running  beyond  191 1. 
Mr.  Stevenson  now  demanded  that  the  Government 
should  insert  in  the  Agreement  a  provision  to  the  effect 
that  notwithstanding  anything  contained  in  the  Tele- 
graph Act,  1899,  "the  Postmaster  General  should  be  at 
liberty  to  extend  the  present  licenses  to  municipalities 
and  to  grant  new  licenses  to  municipalities  [for  long 
periods]  without  being  under  obligation  to  extend  the 
existing  licenses  of  the  Company."^ 

The  Select  Committee  endorsed  this  request  made  by 
Mr.   Stevenson  on  behalf  of  the  muncipalities  which 

owned  telephone  exchanges,  as  well  as 
Select  Committee  iiir      r   .^       /—,         rr        1  1 

recommends  In-     «"  behalf  of  the  City  of  London  and 

fringcment  of  a  the  London  County  Council.  But  the 
Statutory  Right  Government  rejected  that  part  of  the 
Select  Committee's  Report,  Lord  Stanley,  Postmaster 
General,  saying  that  "the  proposal  of  the  Committee 
was  a  practical  infringement  of  a  statutory  right."^ 

^Report  from  the  Select  Committee  on  Post  OfEce  (Telephone 
Agreement),  1905  ;  q.  741  to  745,  and  2806  to  2826,  Mr.  D.  M. 
Stevenson;  q.  1990,  Sir  Robert  Hunter,  Solicitor  to  Post  Office; 
q.  1626  to  1636,  Mr.  W.  E.  L.  Gaine,  General  Manager  National 
Telephone  Company;  q.  261*  and  2126,  Mr.  H.  B.  Smith,  Permanent 
Secretary  to  Post  Office;  and  q.  1894  to  1903,  1908,  1947.  "43.  iiS6, 
1 1 64  and  1 109,  Sir  George  Murray,  Permanent  Secretary  to 
Treasury. 

"^Hansard's  Parliamentary  Debates;  August  9,   1905;  P-  83^ 


306        THE  TELEPHONE   IN   GREAT   BRITAIN 

The  Select  Committee  recommended  also  that  the 
National  Telephone  Company  be  put  under  obligation 
to  grant  intercommunication  free  of  charge  between  its 
Select  Committee  subscribers  and  those  of  any  municipal 
recommends  Un-  telephone  system  that  should  be  es- 
fair  Competition  tablished  between  September  i,  1905, 
and  December  31,  191 1.  That  recommendation  also, 
the  Government  rejected.  Lord  Stanley,  Postmaster 
General,  said :  "That  meant  that  if  the  Company  had 
worked  up  a  business  of,  say,  300  subscribers  in  a  town, 
a  municipality  entering  the  field  would  at  once  enjoy 
the  advantage  of  having  those  300  members,  not  in- 
deed as  subscribers,  but  as  communicants.  He  thought 
that  a  most  unfair  condition,  and  he  was  not  surprised 
that  the  Company  would  not  agree  to  it." ... . 

Had  the  Government  compelled  the  National  Tele- 
phone Company  to  accept  the  two  policies  advocated 
by  Glasgow,  Hull,  the  City  of  London  and  the  County 
of  London,  and  endorsed  by  the  Select  Committee  of 
1905,  it  would  have  exposed  the  holders  of  the  securi- 
ties of  the  National  Telephone  Company  to  the  possi- 
bility of  a  loss  even  more  serious  than  the  loss  inflicted 
upon  those  holders  by  the  Report  of  the  Select  Com- 
mittee of  1898  and  the  Telegraph  Act,  1899.  With 
practically  no  risk  to  themselves,  the  municipalities 
could  have  established  in  the  years  1905  to  191 1  a 
series  of  municipal  telephone  exchanges;  and  in  191 1, 
the  Postmaster  General  would  have  been  at  liberty  to 
purchase  only  such  parts  of  the  National  Telephone 


THE  AGREEMENT  OF  1905  307 

Company's  provincial  plants  as  he  would  require  in 
order  to  build  up  the  several  municipal  plants  into 
complete  local  plants.  Indeed,  the  Municipal  Jour- 
nal^ advocated  that  policy,  saying  that  it  was  the  only 
means  of  protecting  the  public  against  the  Post  Office 
paying  the  National  Telephone  Company  a  price  for 
its  plant  "that  will  make  cheap  telephones  impossible 
for  the  next  half  century."  The  Mimicipal  Journal 
added  that  the  proposal  in  question  would  not  be  unfair 
to  the  Company,  "which  has  all  along  conducted  its 
operations  in  the  light  of  the  knowledge  that  its  license 
expires  in  191 1." 

In  the  House  of  Commons,  on  August  9,  1905,  Mr. 
Lough  moved,  on  behalf  of  the  municipalities :  "That 
the  sanction  of  the  House  shall  not  be  given  to  the  pro- 
posed purchase  agreement  between  the  Postmaster  Gen- 
eral and  the  National  Telephone  Company,  unless  the 
various  recommendations  of  the  Select  Committee  are 
embodied  therein".  .  .  .The  Motion  was  rejected  by  a 
vote  of  187  to  no.  In  the  course  of  the  debate,  Lord 
Stanley,  Postmaster  General,  said:  "After  the  Act  of 
1899  was  passed,  it  was  open  to  any  municipality  or 
urban  district  council  to  apply  for  a  license.     There 

r     ,  ^,  were  no   less  than    i,'^^4  bodies  who 

Lord  Stanley  'oo-r 

on  Telegraph  could  have  taken  out  such  a  license. 
Act,  1899  Out  of  these,  fifty-nine  wrote  to  the  Post 

Office,  thirteen  took  out  a  license,  only  six  out  of  the 
thirteen  set  up  a  telephone  service,  and  one  of  those 

*  Issue  of  January  13,  1905. 


308        THE  TELEPHONE   IN   GREAT   BRITAIN 

promptly  sold  it  to  the  National  Telephone  Company . . 
. .  No  Postmaster  General  in  his  senses  on  either  side 
of  the  House  would  give  a  single  license  to  a  munici- 
pality between  now  and  191 1.  It  had  been  quoted 
against  him  that  in  1904^  he  said  he  was  in  favor  of 
municipal  telephones.  Among  his  many  stupid  re- 
marks, he  had  never  made  one  half  so  stupid  as  that. 
He  had  since  then  gone  most  carefully  into  the  matter. 
He  was  absolutely  convinced  that  he  was  entirely 
wTong,  and  that  in  the  future  the  telephone  service 
must  be  as  completely  in  the  hands  of  the  State,  if  it 
was  to  be  "thoroughly  efificient,  as  was  the  telegraph 
or  the  postal  service.". .  . . 

In  the  course  of  the  debate  of  August  9,  1905,  Lord 
Stanley,  Postmaster  General,  said  that  the  demand  for 
increased  telephone  facilities  would  call  for  the  expen- 
diture of  $66,250,000  in  the  years  1905  to  191 1.  The 
Postmaster  General  was  restating  the  statement  made 
The  Capital  repeatedly  by  Mr.  W.   E.   L.   Gaine,^ 

Investment  General   Manager  National  Telephone 

equired  Company,  that  if  the  Company  were 

put  in  the  position  in  which  it  could  do  justice  to  the 

'  Compare  Hansard's  Parliamentary  Debates ;  March  23,  1904, 
Lord  Stanley,  Postmaster  General :  "He  would  be  only  too  ready 
to  help  in  every  way  any  municipality  that  wished  to  start  its  own 
telephones,  and  he  hoped  the  present  difficulty,  that  a  municipality 
could  not  get  an  extension  beyond  191 1  without  the  company  receiv- 
ing the  same  extension,  might  be  overcome  when  they  came  to  a 
general  agreement." 

•The  Electrician;  May  16,  1902,  and  July  14,  1905;  and  Report 
from  the  Select  Committee  on  Post  Office  (Telephone  Agreement), 
1905;   q-   553- 


THE  AGREEMENT  OF  1905  309 

opportunities  for  developing  the  telephone  service,  it 
could  find  employment  for  $10,000,000  a  year.  Those 
estimates  of  what  could  be  done,  are  in  strong-  con- 
trast to  what  actually  had  been  done.  The  largest 
investment  of  capital  made  by  the  National  Telephone 
Company  in  any  one  year  had  been  that  of  1904,  namely 
$4,253,000.  In  the  four  years  ending  with  1904,  the 
average  annual  investment  had  been  only  $3,430,000. 
And  in  the  seventeen  months  ending  with  May,  1906, 
the  investment  of  capital  was  only  $5,275,000. 

At  the  annual  meeting  of  the  National  Telephone 
Company  held  in  July,  1906.  the  Chairman  of  the 
Company  stated  that  during  the  next  five  and, one-half 
years  the  Company  would  not  attempt  to  build  up  busi- 
ness that  would  require  nursing,  as  well  as  time  to 
develop.  It  would  confine  itself  to  operations  that 
from  the  start  would  pay  interest  and  all  other  proper 
charges.*  That  policy,  of  course,  was  forced  upon 
the  Company  by  the  fact  that  in  191 1  it  would  be 
obliged  to  sell,  at  the  mere  cost  of  replacement,  such 
part  of  its  plant  as  would  be  suitable  to  the  purposes 
of  the  Postmaster  General,  and  would  receive  nothing 
whatever  for  the  remainder  of  its  plant. 

Before  the  Select  Committee  of  1905,  Mr.  W.  E.  L. 
Gaine,  General  Manager  National  Telephone  Com- 
pany, stated  that  in  view  of  the  Company  the  Govern- 
ment's charge  of  $5  a  year  per  mile  of  double  wire- 

^  The  Electrician :  July  27,  1906. 

-In  July,  1905,  the  average  cost  of  laying  underground  in  Metro- 
politan London  some  163,000  miles  of  wire  had  been  $84.50  per  mile 
of  double  wire.     Report  of   the  Postmaster  General,   1905. 


310         THE  TELEPHONE   IN   GREAT   BRITAIN 

laid  underground  for  the  Company  was  too  high.  He 
expressed  the  fear  that  the  charge  in  question  would 
lead  the  Company  to  restrict  the  use  which  it  would 
make  of  the  Post  Office's  offer  to  lay  underground 
wires  for  the  Company  in  any  telephone  area  in 
which  there  was  no  municipal  telephone  plant.^ 

The  Agreement  of  1905,  therefore,  has  warded  off 
the  danger  which  had  threatened  the  public,  namely 
the  practical  arrest  of  the  further  investment  of  capital 
by  the  National  Telephone  Company;  but  it  does  not 
Poor  Prospect  of  promise  to  give  the  public  the  benefit 
Adequate  Service  of  that  liberal  investment  of  capital 
which  the  National  Telephone  Company  would  be  glad 
to  make.  Until  the  close  of  the  year  191 1,  the  British 
public  will  have  to  content  itself — as,  indeed,  it  has  been 
obliged  to  do  since  the  year  1880 — with  telephonic  fa- 
cilities which  in  point  of  extent  lag  far  behind  the 
facilities  that  British  captains  of  industry  and  capital- 
ists gladly  would  give  the  public,  could  those  men  ob- 
tain terms  which  would  tempt  them. 

The  extent  to  which  the  telephone  service  at  the  dis- 
posal of  the  people  of  Great  Britain  might  be  increased, 
British  and  ^^  indicated   in  the   following  figures. 

American  In  the  year  1906,  one  person  in  each 

Statistics  jQ^   persons   in  the   United  Kingdom 

was  a  subscriber  to  the  telephone.  On  January  i,  1907, 
one  person  in  each  20  persons  in  the  United  States  was 
a  subscriber  to  the  telephone. 

^Report  from  the  Select  Committee  on  Post  OtHce  (Telephone 
Agreement),  1905  ;  q.  561. 


THE  AGREEMENT  OF  1905  311 

In  1905,  the  Government  achieved  that  at  which  it 
had  aimed  since  1880:  the  right  to  buy  at  reconstruc- 
tion  value — that   is,   with  no   allowance   for   earning 
power — the  telephone  industry  "ready 
Summary  made."     Whether  the  Government  will 

be  able  to  retain  the  property  which  it  will  buy  for  little 
more  than  a  song,  or  will  be  obliged  to  transfer  its  bar- 
gain to  the  municipalities,  remains  to  be  seen. 

The  Association  of  Municipal  Corporations  approved 
the  bargain  "under  the  belief"  that  the  State  would 
reduce  the  tariffs  immediately  upon  taking  possession 
of  the  telephones.  Glasgow  and  the  remaining  muni- 
cipalities that  owned  telephone  plants  asked  the  Gov- 
ernment to  break  the  "Parliamentary  contract"  made 
with  the  National  Telephone  Company  in  1899;  and 
the  Select  Committee  of  1905  endorsed  that  request. 
The  Government,  however,  rejected  it. 

The  National  Telephone  Company  has  announced 
that  during  the  remainder  of  its  life  it  will  confine  the 
further  investment  of  capital  to  expenditure  upon  busi- 
ness that  will  pay  from  the  start;  that  it  cannot  afford 
to  undertake  to  develop  business  that  will  require  time 
and  nursing.  The  prospects  are,  therefore,  that  until 
the  year  19 12,  the  British  public  will  have  to  put  up 
with  the  relatively  inadequate  telephone  facilities  with 
which  it  has  been  obliged  to  content  itself  in  the  past. 


CHAPTER  XVIII 

MUNICIPAL  TELEPHONE  EXCHANGES  OF  GLASGOW, 
BRIGHTON,  HULL,  SWANSEA,  PORTSMOUTH  AND 
TUN  BRIDGE  WELLS 

The  Corporation  of  Glasgow  embarks  in  the  telephone  business, 
expecting  to  install  a  plant  for  about  $95  per  subscriber's  line. 
In  May,  1906,  its  expenditure  had  been  $183  per  subscriber's 
line.  The  Corporation  lays  its  wires  under  the  streets;  at  the 
same  time  denying  the  National  Telephone  Company  all  public 
way-leaves.  It  expects  to  destroy  the  Company's  business  in 
Glasgow ;  but  it  is  beaten  "to  a  stand-still."'  In  September,  1906, 
the  Corporation  sold  its  plant  to  the  Post  Office  for  $1,525,000, 
that  is,  at  a  net  loss  of  $58,980.  Shortly  afterward  the  Postmaster 
General  announced  that  he  would  have  to  reconstruct  the  main 
exchange,  as  well  as  replace  every  one  of  the  12,800  subscribers' 
telephones  in  use.  Those  operations  probably  will  cost  from 
$500,000  to  $750,000.  The  Postmaster  General  also  announced 
that  he  would  have  to  revise,  that  is,  raise,  the  tariffs  enforced  by 
the  Corporation. 

In  October,  1906,  the  Postmaster  General  paid  the  Corporation 
of  Brighton  $245,000  for  its  telephone  plant,  enabling  the  Cor- 
poration to  withdraw  with  a  loss  of  $12,250.  To  the  Corporations 
of  Hull,  Swansea  and  Portsmouth,  the  Postmaster  General 
offered  considerably  less  than  those  Corporations  had  expended 
upon  plant.  Swansea  subsequently  sold  its  plant  to  the  National 
Telephone  Company.  Tunbridge  Wells,  the  only  other  munici- 
pality that  had  gone  into  the  telephone  business,  had  sold  out  to 
the  National  Telephone  Company  in  November,  1903,  after  two 
and  one-half  years  of  operation. 

At  the  Glasgow  Telephone  Inquiry,  1897,  and  before 
the  Select  Committee  on  Telephones,  1898,  Mr.  A.  R. 

312 


MUNICIPAL  TELEPHONE  EXCHANGES         313 

Bennett,  Telephone  Engineer  to  the  Corporation  of 
Glasgow,  submitted  "a  statement  of  the  ascertained 
cost"  of  instalHng  in  Glasgow  a  telephone  system  fully 
equipped  for  5,200  subscribers,  and  with  1,210  spare 
metallic  circuits  for  the  use  of  future  subscribers.  Mr. 
Bennett  termed  his  document  "a  statement  of  ascer- 
tained cost,"  rather  than  an  estimate,  "because  every 
item  in  it  was  covered  by  a  tender  from  a  competent 
well-known  electrical  firm,"  made  in  response  to  invi- 
tations from  the  Town  Clerk  of  Glasgow.  Mr.  Bennett 
stated  that  the  exchange  could  be  built  for  $94  per 
subscriber ;  and  that  it  could  be  operated  under  a  tariff 
of  $26.25  a  year  for  unlimited  service.  He  added  that 
he  should  advise  the  Corporation  to  install  a  plant  that 
would  accommodate  at  least  20,000  to  25,000  sub- 
scribers ;  and  that  the  cost  per  subscriber  of  the  larger 
Glasgow  Corpor-  exchange  would  not  be  materially  in 
ation  Engineer's  excess  of  $94.  He  stated  that  his  faith 
Estimate  -^^  j^jg  estimate  was  in  no  way  shaken 

by  the  testimony  of  Mr.  W.  H.  Preece,  Engineer-in 
Chief  to  Post  Office,  that  outside  of  Metropolitan  Lon- 
don an  underground  metallic  circuit  telephone  system 
for  5,000  subscribers  would  cost  $225  per  subscriber.^ 
Before  the  Select  Committee  of  1898,  Mr.  D.  Sin- 
clair, Engineer-in-Chief  to  National  Telephone  Com- 
pany, stated  that  the  cost  of  installing  in  Glasgow 
a  metallic  circuit  underground  system   which  should 

^Glasgow  Telephone  Inquiry,  1897;  q.  5557.  5579.  5356,  5359, 
5360.  5362  to  5368,  and  p.  297  ;  and  Report  from  the  Select  Coni' 
mittee  on  Telephones,  1898  ;ji.  1681  and  following. 


314        THE   TELEPHONE    IN    GREAT   BRITAIN 

remain  stationary  at  5,000  subscribers  would  be  some- 
thing under  $200  per  subscriber.  He  added  that  an 
estimate  of  that  kind  was  of  no  vahie  because  a  grow- 
ing telephone  system  never  could  fully  utilize  its  plant. 

Experience  in   Great   Britain   and  the 
National  Tele- 
phone  Company     United  States  had  shown  that  when  the 

Engineer's  spare  wires  had  fallen  to  25  per  cent. 

EsttfH  CL  tc 

of  the  total,  it  was  necessary  to  reopen 

the  streets  and  put  down  new  pipes  and  cables.     The 

cost  of  an  exchange,  per  subscriber,  at  any  particular 

moment  was  very  largely  a  question  of  the  amount  of 

spare  plant.     When  the  proportion  of  spare  plant  was 

very  large,  the  cost  per  subscriber  was  very  high ;  when 

it  was  at  its  minimum — about  25  per  cent. —  the  cost 

per  subscriber  was  at  its  minimum.^ 

In  July,  1900,  the  Corporation  of  Glasgow  began  the 

construction  of  a  telephone  plant  which  was  to  serve 

an  area  of  143  square  miles  with  a  population  of  about 

1,000,000.     The  system  was  opened  for  business  in 

^,  ,  ,  ^  March,  igoi :  and  in  May,  IQ06,  it  had 
The  Actual  Cost     .  '    ^^      '  j^     y     ^ 

in  use  12,820  telephones,  or  about 
10,000  subscribers'  lines.  At  the  last  mentioned  date 
there  was  utilized  about  80  per  cent,  of  the  switch  room 
plant  and  about  55  per  cent,  of  the  telephone  wires. 
The  capital  invested  in  plant  was  $183  per  subscriber's 
line  in  use,  or  $143  per  telephone  in  use.^ 

^Report  from  the  Select  Committee  on  Telephones,  1898  ;q.  8281, 
8285,  8336  and  8337. 

^The  Electrician;  September  15,  1905;  Garcke:  Manual  of 
Electrical  Undertakings,  1907,  p.  1023  ;  and  Report  from  the  Select 
Committee  on  Post  Office  (Telephone  Agreement),  1905  ;  q.  761, 
762,  76s  and  774,  Mr.  D.  M.  Stevenson,  Subconvener  Glasgow  Tele- 
phone Committee. 


MUNICIPAL  TELEPHONE  EXCHANGES         315 

The  Corporation  of  Glasgow  laid  its  wires  entirely 
underground  in  the  center  of  the  city  and  in  one  of  the 
suburbs;  further  afield  it  usually  ran  its  wires  over- 
head, although  it  always  laid  the  main  routes  under- 
ground.^ At  the  same  time  it  refused  the  National 
Unfair  Telephone  Company  permission  to  lay 

Competition  its  wires  underground."     In  1897,  be- 

fore the  Commissioner  appointed  to  inquire  into  the 
Telephone  Exchange  Service  in  Glasgow,  Mr.  Edward 
T.  Salvesen,  of  counsel  to  the  Corporation  of  Glasgow, 
had  argued  that  one  reason  why  the  Corporation  should 
not  give  the  National  Telephone  Company  under- 
ground way-leaves  was  that  without  such  way-leaves 
the  Company's  system  was  "valueless ....  because  the 
competition  that  the  Glasgow  Corporation  can  bring 
to  bear  will  effectively  annihilate  this  Company  in  Glas- 
gow, and  will  redound  to  the  permanent  advantage  of 
Glasgow."^ 

The  National  Telephone  Company  could  not  afford 
to  let  the  Corporation  of  Glasgow  drive  it  from  the 
field;  for  such  success  on  the  part  of  the  Corporation 
might  have  given  a  great  impetus  to  municipal  competi- 
tion throughout  England  and  Scotland.  Then  again, 
as  Mr.  Salvesen,  of  counsel  to  the  Corporation,  himself 


^Report  from  the  Select  Committee  on  Post  OfUcc  (Telephone 
Agreement),  1905;  q.  760,  Mr.  D.  M.  Stevenson,  Subconvener  Glas- 
gow Telephone  Committee. 

^Report  of  the  Select  Committee  on  Post  OfUce  (Telephone 
Agreement),  1905;  q.  874,  Mr.  D.  M.  Stevenson;  and  q.  108,  Sir 
Robert  Hunter,   Solicitor  to   Post  Office. 

*  Glasgow   Telephone   Inquiry,   1897;    P-   227. 


316        THE   TELEPHONE   IN    GREAT    BRITAIN 

pointed  out,  the  installation  of  electric  tramways  by  the 
Corporation  would  have  impaired  seriously  the  effi- 
ciency of  the  Company's  telephone  system,  by  produc- 
ing induction  currents  in  the  subscribers'  wires.  For 
those  two  reasons  the  Company  went  to  the  heavy  ex- 
pense of  converting  its  overhead  single  wire  system  into 
an  overhead  metallic  circuit  system,  with  the  knowledge 
that  ultimately  practically  the  whole  cost  of  that  con- 
version would  have  to  be  written  off  as  "wastage." 
The  Corporation  of  Glasgow  was  of  opinion  that 
the  cost  of  the  conversion  would  exceed  the  cost  of 
constructing  de  novo  an  underground  metallic  circuit 
system.  Mr.  W.  E.  L.  Gaine,  General  Manager  Na- 
tional Telephone  Company,  agreed  with  the  Corpora- 
tion on  that  point.^  He  added,  that  after  the  Company 
should  have  gone  to  such  great  expense,  its  system 
would  not  be  as  efficient  as  if  it  were  underground. 
The  reason  why  no  overhead  system  could  be  efficient 
was  stated  by  Mr.  D.  Sinclair,  Engineer-in-Chief  to 
National  Telephone  Company.  That  officer  stated  that 
Inefficiency  of  the  19,424  mechanical  faults  that  had 
Overhead  Plant  been  found  in  the  Company's  Glasgow 
plant  in  the  three  preceding  years  had  been  due  to  the 
following  causes:  Building  operations  had  caused 
9,074  interruptions  of  service;  withdrawals  of  way- 
leaves  over  house-tops  had  caused  4,977  interruptions 
of  service;    improvements  on  roofs  and  the  erection 

^Glasgow  Telephone  Inquiry,  1897;  q.  7770  to  7780,  Mr.  Salve- 
sen,  cross-examining  Mr.  Gaine ;  q.  7589,  Mr.  Gaine ;  and  q.  9795, 
Mr.   Forbes,    Chairman    National   Telephone    Company. 


MUNICIPAL  TELEPHONE  EXCHANGES         317 

of  larger  standards  had  caused  3,954  interruptions; 
fires  had  caused  262  interruptions  of  service;  storms 
had  caused  700  interruptions;  and  457  interruptions 
had  been  due  to  sundry  causes.^  Mr.  Gaine  had  added 
that  the  necessity  of  keeping  within  the  Hmits  of  the 
strain  that  the  roofs  could  withstand,  would  compel  the 
Company  to  use  india-rubber  cables,  which,  in  turn, 
would  impede  long  distance  conversation  over  the  Post 
Office  trunk  lines.^  Finally,  Mr.  Commissioner  Jame- 
son had  urged — and  Mr.  Salvesen  had  agreed  with 
him — that,  in  the  interests  of  the  owners  of  the  houses 
as  well  as  of  the  general  public,  "it  would  be  very 
desirable  not  to  double  that  system,  with  its  increased 
weight  and  increased  bulk.  Is  it  in  the  interests  of  the 
public,  and  having  regard  to  amenity,  to  have  these 
hideous  cables  over  the  streets?"^ 

The  Corporation  established  the  following  tariffs : 

Unlimited      service,      one-party      line, 

The  Tariffs  <>   ^     ^  j.  i.      r         o-^^ 

$26.25  a  year;    two-party  Ime,  $21  a 

year;  four-party  line,  $15.75  ^  year.  Measured  serv- 
ice: one-party  Hne,  an  installation  charge  of  $17.50  a 
year,  and  2  cents  for  each  call  originated  by  the  sub- 
scriber. 

The  National  Telephone  Company  retained  un- 
changed its  tariff  for  the  one-party  line  unlimited  serv- 
ice, to  wit,  $50  a  year  for  the  first  connection;    and 

^Glasgow  Telephone  Inquiry,  1897;  Q-  8080. 
^  Glasgozv  Telephone  Inquiry,  1897;  Q.  7594. 
^Glasgow  Telephone  Inquiry,  1897;  p.  228. 


318        THE   TELEPHONE   IN    GREAT    BRITAIN 

$42.50  for  each  additional  connection.  But  it  intro- 
duced a  number  of  "competitive"  tariffs.  They  are: 
unlimited  service,  two-party  line,  $30  a  year,  and 
four-party  line,  $20  a  year.  The  competitive  measured 
service  tariffs  are :  one-party  line,  an  annual  installa- 
tion charge  of  $25  a  year,  600  calls  free,  and  additional 
calls  2  cents  each,  or  300  calls  for  $5 ;  one-party  line 
for  private  houses,  $25  a  year,  1,500  calls  free,  excess 
calls  2  cents  each ;  ten-party  line,  no  installation  charge, 
subscriber  guaranteeing  two  calls  a  day  at  2  cents  each  ; 
and  finally,  "omnibus,"  or  twenty-party  line,  an  annual 
installation  charge  of  $6.25  a  year,  600  calls  free,  and 
excess  calls  i  cent  each.  The  Company's  officers  have 
instructions  not  to  open  an  omnibus  line  with  less  than 
12  subscribers;  and  in  July,  1905,  the  average  number 
of  subscribers  per  omnibus  line  was  12. i.* 

The  Municipal  Telephone  Exchange  gained  sub- 
scribers very  rapidly  until  May,  1903,  when  it  had 
9,123  instruments  in  use.^  After  that  date  the  rate 
of  increase  slackened;  and  since  May,  1905,  the  num- 
ber of  municipal  telephones  in  use  has  been  practically 
Beaten  to  a  Stationary  at  about   12,800.     In  June, 

"Stand-still"  1905,  Mr.  D.  M.  Stevenson,  Subcon- 

vener  Glasgow  Telephone  Committee,  stated  that  some 
people  had  given  up  their  unlimited  service  subscription 

^  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  627  and  1643,  Mr.  W.  E.  L.  Gaine,  General 
Manager  National  Telephone  Company. 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  765,  Mr.  D.  M.  Stevenson,  Subconvener  Glas- 
gow Telephone  Committee. 


MUNICIPAL  TELEPHONE  EXCHANGES         319 

to  the  Corporation  Exchange  in  order  to  subscribe  to 
the  Company's  "omnilnis"  line  service.^ 

While  the  number  of  municipal  telephones  in  use 
increased  only  from  11,300  in  May,  1904,  to  12,360 
in  May,  1905;  and  in  May,  1906,  was  only  12,800; 
the  number  of  Company  telephones  in  use  jumped  from 
16,471  in  June,  1904,  to  22,227  i^''  June,  1905,-  and  to 
29,900  on  December  31,  1906.  In  other  words,  the 
city  was  "beaten  to  a  stand-still"  in  the  contest  which  it 
had  invited  in  the  expectation  of  ruining  the  National 
Telephone  Company's  business  and  property  in  the 
Glasgow  telephone  area.^  In  that  contest  Glasgow  had 
had  several  great  advantages.  In  the  first  place,  under- 
ground way-leaves;  in  the  second  place,  a  charter  run- 
ning until  December  31,  1913;  in  the  third  place,  the 
agreement  of  the  Post  Office  to  purchase  on  December 
31,  19 1 3,  at  reconstruction  value,  such  part  of  the  city's 
plant  as  should  be  suitable  to  the  purposes  of  the  Post- 
master General;   and  last,  but  not  least,  the  great  ad- 


*  Report  from  the  Select  Coynmittee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  779. 

''The  Electrician;  September  15,  1905;  and  The  Electrical  Re- 
view; July  27,  1906. 

^Report  addressed  to  the  Lords  Commissioners  of  Her  Majesty's 
Treasury  by  Andrew  Jameson,  Q.  C,  etc.;  p.  16.  "But  it  is  evident 
that  what  the  Corporation  wish  and  expect  to  do  is  to  extinguish 
the  National  Telephone  Company  altogether  as  far  as  the  Glasgow 
district  is  concerned.  It  is  idle  to  speak  of  competition  when  they 
propose  to  supply  a  metallic  circuit  underground  system,  and  at  the 
same  time  to  prevent  the  National  Telephone  Company  (who  wish 
to  do  so)  from  supplying  the  same.     It  appears  to  me  that  this  can 

have    only    one    result The    result    of    such    a    competition 

would  ultimately  be  not  to  keep  up  two  competing  services,  but  to 
substitute  one  monopoly  for  another." 


320        THE   TELEPHONE   IN   GREAT   BRITAIN 

vantage  of  being  able  to  start  with  all  the  knowledge 
of,  and  improvement  in,  the  art  of  telephony  which 
some  twenty  years  of  experience  of  private  companies 
in  Great  Britain  and  the  United  States  had  supplied 
and  effected  at  great  cost  to  those  companies. 

The  National  Telephone  Company  entered  the  con- 
test under  a  twofold  handicap.  In  the  first  place,  it  had 
no  underground  way-leaves,  except  between  its  ex- 
changes, where  the  Postmaster  General  rented  the  Com- 
pany underground  wires.  In  the  second  place,  every 
dollar  which  the  Company  invested  in  overhead  metallic 
circuit  wires,  it  invested  with  the  knowledge  that 
sooner  or  later  the  investment  would  have  to  be  written 
off  as  wastage.  It  has  often  been  said  that  the  Company 
had  a  great  advantage  in  the  fact  that  it  could,  and 
did,  run  at  a  loss  its  Glasgow  branch,  making  good 
that  loss  out  of  the  profits  earned  in  cities  where  there 
was  no  municipal  competition.  Before  the  Select  Com- 
mittee of  1905,  Mr.  W.  E.  L.  Gaine,  General  Manager, 
"emphatically"  denied  that  the  Company  was  pursuing 
the  policy  in  question ;  he  added  that  the  Company  was 
so  well  satisfied  that  the  "omnibus"  service  was  profit- 
able, that  it  had  introduced  that  service  in  a  number  of 
places  where  there  was  no  competition.^  Mr.  Gaine 
also  drew  attention  to  the  fact  that  Mr.  Hanbury's 
Select  Committee  of  1898  had  asked  for  "real  and 
effective  competition;"  that  one  could  not  engage  in  a 


^  Report   from   the  Select   Committee   on   Post   Office    (Telephone 
Agreement),  1905;  p.  262:     Analysis  of  the  various  classes  of  tele- 


MUNICIPAL  TELEPHONE  EXCHANGES         321 

fight  with  his  gloves  on,  and  that  the  Company  had 
taken  off  its  gloves.^ 

Before  the  same  Committee,  Mr.  H.  Bahington 
Smith,  Permanent  Secretary  to  Post  Office,  expressed 
the  opinion  that  in  the  cities  in  which  municipal  plants 
were  competing  with  the  Company,  the  Company's 
profits  were  small,  adding  that  he  would  not  be  sur- 
prised to  hear  "that  in  some  cases  they  were  non- 
existent."^ 

On  March  20,  1905,  the  Postmaster  General,  Lord 

Stanley,  wTote  the  Corporation  of  Glasgow  that  in  his 

opinion   "it  would   be   to   the   interest 
Postmaster 
General  pur-         both  of  the  Corporation  and  the   Na- 

chases  Glasgow     tional  Telephone  Company  as  well  as, 

eventually,  of  the  public  service,  if  an 

arrangement  could  now  be  devised  to  unify  in  the  near 

future  the  competitive  telephone  systems  in  the  Glas- 

phone    services    provided   by   the    National    Telephone    Company,    in 
March,   1905. 

London  Provinces 

Class  Number  of  Annual  Number  of  Annual 

of  Service  Telephones        Revenue       Telephones         Revenue 

Exclusive    Exchange 

and  Private  Lines,  $  $ 
Unlimited    Service       53,030          2,147,990          175,788          5,901,460 
Exclusive  Line,  Mes- 
sage Rate 20,741             764,695            3S<722            987,665 

Party  Lines,  all 
classes  except  Om- 
nibus      12  490  35,260  816,770 

Omnibus   Lines o  o  5,464  35,005 

73,783         2,913,175         252,234         7,740,900 
^Report   from   the  Select   Committee   on   Post   Office   (Telephone 
Agreement ) ,  1905  ;  q.  1667,  1668,  1643,  627  and  637. 

^Report   from    the   Select   Committc;   on  Post   Office   (Telephone 
Agreement),   1905  ;   q.  222   and  223. 
21 


322        THE   TELEPHONE   IN   GREAT   BRITAIN 

gow  area,  and  to  continue  their  development  so  as  to 
avoid  waste  arising  from  duplication  of  plant.". .  .He 
added  that  there  already  had  been  a  considerable  dupli- 
cation of  plant ;  and  if  competition  should  continue  until 
December  31,  191 1,  there  would  be  in  existence  at  that 
date  a  considerable  amount  of  plant  which  the  Post- 
master General  would  not  purchase.^  The  result  of  the 
negotiations  thus  inaugurated  was  that  in  September, 
1906,  the  Corporation  sold  its  telephone  plant  to  the 
Postmaster  General.  The  price  was  $1,525,000.  On 
May  31,  1906,  the  Corporation's  capital,  expenditure 
had  been  $1,805,380;  in  addition,  the  Corporation  had 
had  on  hand  $83,830  of  stores,  tools,  etc.,  which  were 
sold  to  the  Post  Office  under  a  separate  agreement. 
On  the  other  hand,  the  Corporation  had  accumulated  a 
sinking  fund  of  $185,665,  and  a  depreciation  fund  of 
$35,735.-  The  Corporation's  net  loss  on  its  telephone 
experiment  therefore  was  $58,980. 

The  Electrical  Review,^  in  the  course  of  its  comments 
upon  the  sale,  said  :  "No  secret  is  made  of  the  fact  that 
the  figure  [$1,525,000]  has  been  arrived  at  by  dint 
of  political  pressure  on  the  Government  Departments 
concerned,  and  that  it  is  considerably  in  excess  of  the 
Postmaster  General's  original  offer."  The  writer  has 
been  told  by  a  well-informed  person  that  it  was  a 
matter  of  rather  widespread  knowledge  in  the  circles 

'  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905  ;  q.  793. 

'The   Municipal    Year-Book,    1907;    p.    542, 
'July    13,    1906. 


MUNICIPAL  TELEPHONE  EXCHANGES         323 

interested  that  the  Postmaster  General's  first  offer  was 
$1,350,000. 

Mr.  James  Alexander,  Chairman  Glasgow  Telephone 
Committee,  in  the  course  of  the  speech  in  which  he 
advocated  the  sale  to  the  Postmaster  General,  said : 
"Another  objection  to  the  Corporation  continuing  to 
work  the  telephone  system  is  the  fact  that  it  would  be 
Mwiicipal  necessary  to  borrow  at  least  a  sum  of 

Plant  Obsolete  $500,000,  in  order  to  make  the  neces- 
sary alteration  on  the  switch-board  and  to  carry  on  the 
system,  and  to  meet  the  capital  expenditure  necessary 
in  view  of  the  increasing  number  of  subscribers."^  At 
the  time  of  this  speech,  the  number  of  the  Corporation's 
subscribers  had  been  all  but  stationary  for  a  period  of 
two  years ;  and  at  the  same  time  only  about  55  per 
cent,  of  the  Corporation's  wires  were  in  use.  These 
facts  led  Engineering  and  other  prominent  British  en- 
gineering journals  to  say  that  Mr.  Alexander's  speech 
was  in  effect  an  admission  of  the  soundness  of  their  past 
criticisms  upon  the  Corporation's  plant,  to-wit,  that  it 
would  cost  fully  $500,000  to  bring  the  Corporation's 
exchanges  to  modern  standards  of  efficiency.  Engi- 
neering added  that  it  was  better  that  the  Chancellor  of 
the  Exchequer  should  pay  $500,000  too  much,  than  that 
the  agitation  of  the  municipalities  which  owmed  tele- 
phone plants  should  be  indefinitely  prolonged. 

The   Corporation  had   equipped    its   five   main   ex- 
changes   with    the    so-called    call-wire    system.      The 

^  Engineering ;  Ju\y  13,  1906. 


324        THE   TELEPHONE    IN    GREAT    BRITAIN 

principle  of  that  system  is  that  two  different  wires  run 
to  each  subscriber.  One  wire  is  used  in  calhng  the  ex- 
change, and  is  attached  permanently  to  the  head  tele- 
phone of  the  operator.  The  subscriber,  on  putting  him- 
self in  communication  with  the  operator,  must  state 
his  own  number  as  well  as  that  of  the  person  whom  he 
wants  to  call.  At  the  end  of  the  conversation  he  has  to 
ask  the  operator  to  disconnect  him.  Only  the  person 
who  originates  the  call  can  give  the  order  to  disconnect. 
The  result,  in  practice,  is  that  many  wrong  numbers  are 
given,  and  that  the  originator  often  fails  to  give  the 
order  to  disconnect,  with  the  result  that  his  line  often 
is  reported  to  be  engaged,  when  in  fact  it  is  not  in  use. 
Again,  since  the  call  wire  is  made  to  serve  many  sub- 
scribers, during  the  busy  time  of  the  day  it  often 
happens  that  several  persons  call  over  the  call  wire  at 
once,  the  one  who  calls  loudest  or  most  angrily  gener- 
ally getting  first  service.  For  the  service  of  large  cities, 
the  call-wire  system  was  universally  acknowledged  to 
be  antiquated  in  1900,  when  the  Corporation  of  Glasgow 
established  its  telephone  system.  The  use  of  this 
system  by  the  National  Telephone  Company^  had  been 
one  of  the  reasons  why  the  Company's  service  had 
proven  unsatisfactory  in  Glasgow ;  and  by  August, 
1902,  at  the  latest,  the  Company  had  established  auto- 
matic signalling  and  clearing.^ 

Before  the  Select  Committee  of  1905,  Mr.   A.   R. 

'  The   Company  introduced  the  call-wire  system  in   Glasgow  and 
Manchester,  but  in  no  other  large   city. 
'The  Electrician;  August  15,   1902. 


MUNICIPAL  TELEPHONE  EXCHANGES         325 

Bennett,  who  had  designed  all  of  the  municipal  tele- 
phone plants  then  in  existence,  testified  as  follows :  "It 
was  impracticable  for  the  corporations  to  adopt  com- 
mon battery  speaking  because  that  system  was  covered 
by  patents  which  were  acquired  by  the  National  Tele- 
phone Company,  so  that  they  held  the  sole  right  to  use 
those  patents  in  the  United  Kingdom ;  and,  of  course, 
they  were  not  likely  to  grant  licenses  to  their  com- 
petitors. There  are  other  reasons  [for  the  failure  of 
the  municipalities  to  adopt  central  battery  speaking], 
but  that  was  the  one  which,  I  may  say,  choked  off  the 
municipalities  when  they  considered  the  question  in  the 
first  instance."  On  the  other  hand,  Mr.  John  Gavey, 
Engineer-in-Chief  to  Post  Ofiice,  testified :  "Mr. 
Bennett  himself  appears  to  be  a  recent  convert  to  auto- 
matic signalling*  [and  clearing],  because  in  the  case  of 
Glasgow,  by  far  the  largest  exchange  he  has  designed, 
he  did  not  provide  automatic  calling  and  clearing  ap- 
paratus at  his  main  exchange,  and  I  may  add  that  I 
had  considerable  difficulty  in  inducing  him  to  provide 
this  automatic  signalling  in  connection  with  the  [Post 
Office]  trunk  service."-  This  testimony  of  Mr.  Gavey, 
together  with  the  further  fact  that  the  Post  Office  intro- 
duced central  battery  signalling  as  well  as  speaking  in 
the  Metropolitan  London  system  opened  in  March,  1902, 

^  Glasg07v  Telephone  Inquiry,  1897;  q.  5200,  Mr.  A.  R.  Bennett 
argues  that  "vigilance  is  all  that  is  required"  in  order  to  overcome 
the  defects  alleged  to  be  inherent  in  the  call-wire  system. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  1905;  q.  1256  to  1263,  Mr.  A.  R.  Bennett;  and  q.  1792, 
Mr.  John  Gavey. 


326        THE  TELEPHONE   IN   GREAT   BRITAIN 

would  seem  to  indicate  that  it  was  not  impossible  to 
purchase  of  the  Western  Electric  Company,  the  owners 
of  the  patents  in  question,  the  right  to  use  the  central 
battery  signalling  and  speaking  apparatus.  It  tends 
to  support  the  contention  of  the  critics  of  the  Glasgow 
Corporation,  to-wit.  that  the  Corporation  felt  obliged 
t©  adopt  an  antiquated  method  in  order  to  keep  within 
the  low  estimate  of  the  cost  of  establishing  a  telephone 
system  which  it  had  put  forth  ever  since  1897.  Be  that 
as  it  may,  it  is  obvious  that,  having  adopted  at  the  start 
antiquated  machinery,  the  Corporation  should  have 
fixed  its  charges  sufficiently  high  to  be  able  to  accum- 
ulate a  depreciation  fund  which,  in  due  time,  should 
permit  the  Corporation  to  discard  its  antiquated  plant. 
From  that  course,  how^ever,  the  Corporation  was  shut 
off  by  the  fact  that  it  had  promised  a  tariff  of  $26.25 
a  year  for  unlimited  service.  Under  that  tariff,  com- 
bined with  the  additional  tariffs  described  in  the 
previous  pages,  the  Corporation,  after  five  years  of 
operation,  had  accumulated  a  depreciation  fund  of 
$35,730  only.i 

Since    the    Postmaster    General    has    acquired    the 

*  Garcke :    Manual   of   Electrical    Undertakings,    1907;    p.    1023; 
and   The  Municipal   Year  Book,    1907,   p.    542. 

Revenue  Expenditure  Proportion 
per  per  borne  by  ex- 
Telephone  Telephone  penditure  to 
in  use  in  use  revenue 
$  $  % 
1902 12.48  12.12  97.1 

1903 18.60  17.72  95.3 

1904 21.12  19.60  92.8 

1905 21.76  21.16  97.2 

1906 21.76  21.73  99-9 


MUNICIPAL  TELEPHONE  EXCHANGES         327 

Glasgow  municipal  plant,  he  has  announced  in  circulars 
and  in  the  Post  Office  Guide  that  he  will  reconstruct 
Postmaster  ^^^  "^^"^  exchange  at  Glasgow.     Since 

General  "reconstruction"  in  this  case  means  not 

willReequip  ^j^jy   ^j^^    reequipment   of   the   central 

exchange,  but  also  the  replacement  of  every  one  of  the 
12,800  subscribers'  instruments  in  use,  it  is  probable 
that  when  the  Postmaster  General  shall  have  completed 
his  work  of  reconstruction,  he  will  find  that  he  threw 
away  not  much  less  than  $750,000  when  he  paid  the 
Corporation  of  Glasgow  $1,525,000  for  its  obsolete 
telephone  plant. 

On  August  II,  1906,  shortly  before  the  purchase 
of  the  Glasgow  Corporation's  plant  was  effected,  Mr. 
Sydney  Buxton,  Postmaster  General,  wrote  the  Cor- 
poration that  it  must  be  clearly  understood  that,  should 
the  Post  Office  purchase  the  plant,  it  would  be  neces- 
sary to  revise  the  tariffs  then  enforced  by  the  Corpora- 
Tariffs  to  be  tion ;  and  to  adapt  them  to  the  altered 
Revised  conditions    under    which    the    service 

thenceforth  would  be  conducted,  including  intercom- 
munication^ between  the  subscribers  to  the  Post 
Office's  system  and  the  subscribers  to  the  National 
Telephone  Company's  system.  "The  rates  which  it 
may  be  found  necessary  to  fix  will  be  applicable  to  new 

'At  the  Glasgow  Inquiry  of  1897,  Mr.  A.  R.  Bennett;  Mr.  S. 
Chisholm,  Bailie ;  Mr.  J.  Colquhoun,  Corporation  Treasurer,  and  Mr. 
D.  M.  Stevenson,  Councillor,  had  expressed  the  most  confident  con- 
viction that  the  National  Telephone  Company  would  either  grant 
intercommunication  or  lose  all  of  its  subscribers.  Glasgow  Tele- 
phone Inquiry,  1897;  q.  5105,  403S.  4Sio  to  4513.  4746  and  4797. 


328        THE  TELEPHONE   IN   GREAT   BRITAIN 

subscribers,  and  to  existing  subscribers  as  their  agree- 
ments become  terminable."* 

While  the  Post  Office  was  negotiating  with  the  Cor- 
poration of  Glasgow,  the  National  Telephone  Company 
informed  the  Corporation  that  they  were  prepared  to 
Nation  I  purchase    the    Corporation's    plant    at 

Telephone  book  value  "and  perhaps  $100,000  to 

Company's  Offer  $150,000  more,  and  that  they  had  no 
doubt  but  that  they  would  be  able  to  arrange  for  a 
continuance  for  a  few  years  of  the  present  subscription." 
The  City  Council  rejected  the  offer  by  a  vote  of  45 
to  13.2 

The  Municipal  Journal  and  some  authors  have  cited 
the  foregoing  offer  as  proof  that  the  Corporation's  plant 
cannot  have  been  obsolete,  and  that  the  Corporation's 
enterprise  must  have  been  financially  sound.  But  the 
offer  proves  nothing  upon  either  of  those  points.  The 
Company  could  afford  to  pay  the  Corporation  much 
more  than  market  value  for  its  plant.  In  the  first  place, 
the  Company,  In  possession  of  the  Corporation  plant, 
would  have  been  in  a  much  better  position  to  put  its  own 
plant  into  such  shape  as  was  desirable  in  view  of  the 
approaching  sale  to  the  Post  Office,  on  December  31, 
191 1.  In  the  second  place,  it  was,  as  a  mere  matter 
of  insurance  against  the  contingencies  of  politics, 
worth  a  good  deal  to  the  Company  not  to  have  the 

^The  Municipal  Journal;  Septembef  7,  1906. 

''The  Municipal  Journal;  September  14,  1906;  and  Engineering; 
July  13,  1906. 


MUNICIPAL  TELEPHONE   EXCHANGES         329 

Post  Office  become  possessor  of  a  telephone  plant  in 
Glasgow.  The  Agreement  of  1905  had  given  the 
Treasury  the  power  to  fix  the  Company's  tariffs  in  any 
area  in  which  the  Post  Office  should  compete  with  the 
Company.  Since  the  Treasury  is  the  Government,  and 
therefore  subject  to  Parliamentary  pressure;  and  since, 
moreover,  Glasgow  has  great  influence  in  Parliament, 
it  is  obvious  that  the  Company  could  not  view  with 
indifference  the  establishment  of  a  Post  Office  telephone 
system  in  Glasgow. 

In  October,  1906,  the  Postmaster  General  paid  the 
Corporation  of  Brighton  $245,000  for  its  telephone 
system,^   which  had  been  in  operation  since  October, 

1903,  and   had  acquired  a  little  over 

Brighton  Sells  1        -i  o^i  •  .  • 

2,000  subscribers,     i  he  sum  m  question 

let  the  Corporation  withdraw  from  its  telephone  venture 
with  a  loss  of  $12,250.^  Like  Glasgow,  the  Corpora- 
tion had  put  its  own  wires  underground,  while  denying 
the  National  Telephone  Company  that  privilege.  Ex- 
cept for  exclusive  line  unlimited  service,  the  Corpora- 
tion's tariffs  had  been  somewhat  higher  than  the  Com- 
pany's tariffs.^  On  March  31,  1906,  the  Municipal 
Telephone  Exchange  had  2,035  telephones  in  use;  and 
on  December  31,  1906,  the  National  Telephone  Com- 
pany Exchange  had  5,342  telephones  in  use. 

^  The  Municipal  Journal,  October  26,   1906. 
-The  Municipal  Year-Book,  1907;  p.  542. 

'  Tariffs  in  force  in  the  Brighton  telephone  area ;  population, 
185,000.  (Continued  on  page   330.) 


330        THE   TELEPHONE   IN    GREAT    BRITAIN 

The  Postmaster  General's  first  offer  for  the  Brighton 
telephone  plant  had  been  $210,000. 

In  March,  1906,  the  Postmaster  General  wrote  the 
Corporation  of  Hull  that  he  could  offer  for  the  Corpora- 
tion's telephone  system  only  a  price  that  "would  fall 

u  II'  IT  •  •.  f  considerably  short  of  the  actual  ex- 
Hull  s  Municipal  ■^ 

Exchange  is  penditure"     upon     the     Corporation's 

Obsolete  ^i^^^     j^^  ^j^g  ^^^^  ^jj^g  ^j^e  National 

Telephone  Company  intimated  that  it  was  prepared  to 
pay  a  price  that  would  enable  the  Corporation  to  with- 
draw without  loss  from  its  telephone  venture;  and  that 
it  would  continue  for  three  years  to  the  Corporation's 
existing  subscribers  the  Corporation's  unlimited  serv- 
ice rates.^     In  the  following  October,  the  Corporation 


National 

Corporation  Telephone 

$  Company 

$ 

Exclusive    line,    unlimited   service..    27.50  50.00 

■c     1     ■       ^■  J  plus  2  cts.  plus  I  cent 

Exclusive   line,   measured    service. .  17.50,  ,,      i7.So,  n 

•^      per  call       '  •'  '     per  call 

Two-party  line,  unlimited  service..    21.00  15.00 

Four-party    line,    unlimited    service.    15.00  

Ten-party  line,   measured   service 2    cts.    per   call,   sub- 

scriber guarantee- 
ing one  call  a  day. 

Omnibus  line $6.25    a   year,    and    i 

cent  for  each  call 
in    excess    of    600. 

In  addition,  the  Company  made  the  following  exclusive  line, 
measured  service  rates:  $25  a  year  with  1800  calls;  $27.50  a  year 
with  2500  calls ;  $30  a  year  with  3000  calls ;  $35  a  year  with  3500 
calls;  $40  a  year  with  4200  calls;  and  $45  a  year  with  5000  calls. 
Additional  calls,   i   cent  each. 

'  Tariffs  in  force  in  the  Hull  telephone  area  ;  population,  300,000. 

(Continued  on  page  331.) 


MUNICIPAL  TELEPHONE  EXCHANGES         331 

resolved  not  to  sell  to  either  the  Post  Office  or  the  Na- 
tional Telephone  Company.^ 

The  Corporation  of  Hull  opened  its  exchange  in 
November,  1904;  and  in  March,  1906,  it  had  1,895 
telephones  in  use.  On  December  31,  1906,  the  Na- 
tional Telephone  Company's  exchange  at  Hull  had 
6,716  telephones  in  use. 

In  March,  1906,  the  Postmaster  General  v^^rote  the 
Corporation  of  Swansea  that  he  deemed  60  per  cent, 
of  the  original  cost  of  the  telephone  system  a  liberal 
c  »   ir         offer.      The    Corporation's    main    ex- 

Swansea  s  Mu-  '^ 

nicipal  Exchange    change  he   would   be   unable   to   use. 
is  Obsolete  Toward   the  end   of   1906,   the   Post- 

master General  offered  $110,000  for  the  Corporation's 
plant,  excluding  the  main  exchange  building,  which 


National 
Corporation  Telephone 

$  Company 

$ 
Exclusive   line,   unlimited   service, 

for    business    premises 31.50  50.00 

Exclusive    line,    unlimited    service, 

for    private    houses 25.00  25.00 

-,,.,.,„  .  _        plus  2  cts.  plus  2  cts. 

Exclusive   line,    toll   service 15.00,*^  „     15.00,  „ 

'  per  call       ■'  per  call 

In  addition  the  Company  offers  the  following  tariffs :  Two- 
party  line,  unlimited  service,  $25  a  year ;  or  toll  service,  2  cents 
per  message,  subscriber  guaranteeing  4  messages  per  day.  Four- 
party  line,  unlimited  service,  $20  a  year.  Ten-party  line,  2  cents  a 
message,  subscriber  guaranteeing  4  cents  per  day.  Omnibus  line, 
$6.25  a  year  for  600  messages ;  additional  messages,  i  cent  each. 
Exclusive  line,  measured  service :  600  messages  for  $25  a  year ; 
1100  messages  for  $30  a  year;  1600  messages  for  $35  a  year;  2100 
messages  for  $40  a  year ;  2600  messages  for  $45  a  year.  Additional 
messages,  2  cents  each. 

'  The  Municipal  Journal ;  March  23  and  October  19,  1906. 


332        THE   TELEPHONE    IN    GREAT    BRITAIN 

had  cost  $12,250.  The  Corporation's  investment  at 
that  time  was  about  $143,500. 

Early  in  1907,  the  Corporation  sold  its  telephone 
plant  to  the  National  Telephone  Company.  The  price 
was  $143,500.1 

The  Corporation's  exchange  had  been  opened  in 
November,  1903;  and  in  February,  1907,  it  had  ac- 
quired 1,215  subscribers,  who  used  1,465  instruments. 
In  December,  1906,  the  National  Telephone  Company 
had  3,029  telephones  in  use  in  the  Swansea  telephone 
area. 

The  Corporation's  tariffs  were  as  follows :  unlimited 
service,  $25  a  year;  measured  service,  $15  down,  and 
2  cents  for  each  call.  The  National  Telephone  Com- 
pany's Swansea  tariff  is  as  follows :  exclusive  line, 
toll  service,  $17.50  a  year,  and  i  cent  per  call;  two- 
party  line,  exclusive  service,  $15  a  year;  ten-party  line, 
2  cents  per  call,  subscriber  guaranteeing  one  call  a  day; 
omnibus  line,  600  messages,  $6.25  a  year,  additional 
calls  I  cent  each.  Exclusive  line,  measured  service, 
1,800  calls,  $25  a  year;  2,500  calls,  $27.50  a  year; 
3,000  calls,  $30  a  year;  3,S*00  calls,  $35  a  year.  Addi- 
tional calls  I  cent  each.  The  population  of  the  Swansea 
telephone  area  is  150.000. 

'The  Electrician;  January  4,  and  February  8  and  15,  1907- 


MUNICIPAL  TELEPHONE  EXCHANGES         333 

To  the  Corporation  of  Portsmouth, 
Portsmouth  s 

Municipal  ^Iso,    the   Postmaster   General   offered 

Exchange  is  materially    less   than    the   Corporation 

Obsolete  i      i   •  i   •      •         ,        , 

had  nivested  m  its  plant. 

In  Portsmouth,  population,  250.000,  the  Corpora- 
tion's tariff  is  :  exclusive  line,  unlimited  service,  $29.37 
a  year;  exclusive  line,  toll  service,  $17.50  a  year,  and 
I  cent  per  call;  $12.50  a  year,  and  2  cents  per  call;  or 
$25  a  year  to  cover  1,800  calls,  with  i  cent  per  addi- 
tional call.  The  National  Telephone  Company's  tariff 
is  the  same  as  in  Brighton,  except  that  there  is  neither 
an  unlimited  service  rate,  nor  an  omnibus,  line  service. 

The  Corporation's  exchange  was  opened  in  1903; 
and  in  December,  1906,  it  had  2,554  telephones  in  use. 
On  the  same  date,  the  National  Telephone  Company 
had  4,269  telephones  in  use. 

The  Corporation  of  Tunbridge  Wells  opened  a  tele- 
phone exchange  in  May,  1901 ;  and  sold  out  to  the 
National  Telephone  Company  in  November,  1903.  In 
the  preceding  municipal  elections,  several  "telephone" 
candidates,  among  them  the  Chairman  of  the  Telephone 
Tunbridge  Committee,   had   been    defeated.     The 

Wells  Sells  National  Telephone  Company  assumed 

the  Corporation's  telephone  debt,  and  agreed  to  establish 
an  exclusive  line,  unlimited  service  tariff  of  $30  a  year. 
The  Company  also  offers  the  following  services: 
$17.50  a  year,  and  2  cents  per  call,  the  subscriber 
guaranteeing  one  call  per  day;   ten-party  line,  2  cents 

^The  Municipal  Joun\al,   March    16,    1906. 


334        THE  TELEPHONE   IN   GREAT   BRITAIN 

per  call,  the  subscriber  guaranteeing  two  calls  per  day. 
The  Tunbridge  Wells  telephone  area  has  a  population 
of  70,000. 

The  Chairman  of  the  Select  Committee  of  1905,  put 
the  following  question  to  Mr.  H.  Babington  Smith, 
Permanent  Secretary  to  Post  Office  since  1903: 
"Taking  the  present  Municipal  experience,  would  your 
answer  to  the  evidence  given  in  favor 
Secretary  to  Post  of  the  Municipal  systems,  be  that  their 
Office  on  Muni-  present  experience  is  too  short  to  form 

cipal  Experience  ,        .    .       -i*?     tit      o     -^i  i-    1 

a  sound  opmion :      Mr.  Smith  replied  : 

"That  is  my  opinion  in  several  respects.  The  cost  of 
the  telephone  service  is  at  the  lowest  point  during  the 
first  years  in  which  it  is  operating ;  the  plant  is  all  new, 
and  therefore  the  charge  for  maintenance  is  at  its 
lowest  point.  Moreover,  in  some  cases  the  maintenance 
of  the  plant  is  guaranteed  by  the  contractor  during  the 
first  year,  or  for  a  certain  period.  Then  again,  the 
wages  and  salaries  of  the  directing  and  operating  staff 
are  at  their  lowest  point.  The  operators,  when  they 
are  first  taken  on,  are  willing  to  serve  at  low  wages ; 
but  there  is  not  the  least  doubt  that  in  the  course  of 
three,  four  or  five  years  their  wages  will  gradually  have 
to  be  raised,  until  eventually  they  reach  the  equilibrium 
which  is  represented  by  a  continuing  service."  Again, 
with  the  growth  of  the  number  of  subscribers,  "the 
cost  of  operation  per  subscriber  grows,  because  ....  the 
number  of  calls  per  subscriber  tends  to  grow,  each  sub- 
scriber being  able  to  communicate  with  more  persons 


MUNICIPAL  TELEPHONE  EXCHANGES         335 

than  before,  and  also  the  proportion  of  junction  calls 
tends  to  grow.  The  Committee  will  have  seen,  by  the 
diagrams  handed  in  by  Mr.  Gavey,  Engineer-in-Chief 
to  Post  Office,  that  both  those  elements  tend  to  pro- 
duce an  increase  in  the  cost  of  operating."^ 

The  municipalities  that  embarked  in  the  telephone 
business  were  able  to  draw  upon  some  twenty  years' 
experience  furnished  by  private  enterprise;  and  they 
withdrew  from  their  telephone  ventures  before  their 
operating  expenses,  including  depreciation,  had  reached 
the  normal  level.  And  yet,  when  the  Postmaster  Gen- 
eral came  to  value  their  plants,  he  could  offer  for  those 
plants  only  60  per  cent,  to  80  per  cent,  of  the  original 
cost.  All  of  the  municipalities  had  "ignored  the  general 
state  of  the  art  of  telephone  engineering."^  In  the  day 
of  central  battery  working  and  automatic  signalling 
and  wires  laid  in  conduits,  "they  had  gone  back  to  the 
days  of  magneto-generators,  indicator  switch-boards, 
local  battery  working"  and  armored  cables. 

The  municipalities  also  had  adopted  an  obsolete  tariff 
policy.  In  deference  to  a  popular  demand  resting  on 
misinformation,  they  had  made  the  unlimited  user  serv- 
ice the  keystone  of  their  tariff  schemes,  though  all 
well  informed  opinion  was  agreed  that  the  only  tariff 
that  is  at  once  financially  sound  and  fair  to  all  users 
of  the  telephone  is  the  exclusive  measured  service  tariff. 

In  short,  in  the  field  of  telephony  the  municipalities 

*  Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),    1905;    q.    2119   and    2120. 

^Engineering;  December  29,  1905,  and  January  19,  1906. 


336        THE  TELEPHONE   IN   GREAT   BRITAIN 

have  shown  the  same  inabihty  to  contribute  aught  to 
Inability  to  industrial  progress  that  they  had  pre- 

Contribute  to         viously  shown  in  the  fields  of  gas  light- 
Progress  jj^g.^  horse  Street  railways,  electric  street 

railways,  electric  lighting  and  the  generation  of  elec- 
tricity in  bulk  for  power  purposes. 


CHAPTER  XIX 

THE  POST  OFFICE  MONOPOLY  AND  WIRELESS 
TELEGRAPHY 

The  Government,  in  1889,  resolved  to  acquire  the  monopoly 
of  submarine  telegraphy  to  neighboring  European  countries.  In 
1896,  it  failed  to  purchase  the  patents  of  Mr.  Marconi,  inventor 
of  wireless  telegraphy.  In  1904,  the  Government  carried  the 
Wireless  Telegraphy  Act,  largely  for  the  purpose  of  protecting 
the  revenues  of  the  Government  submarine  cables.  The  Govern- 
ment curtails  the  use  of  wireless  telegraphy,  both  across  sea  and 
overland.  The  Government  hampers  the  Boy  Messengc*  and 
District  Service  Companies,  for  the  purpose  of  protecting  the 
Post  Office  Monopolies.     An  episode  from  the  reign  of  Charles  11. 

When  the  Post  Office  Telegraph  Monopoly  was 
created,  in  1869,  there  was  no  thought  of  extending  it 
to  submarine  telegraphy.  But  when  the  Submarine 
State  acquires  Telegraph  Company,  in  1889,  applied 
Submarine  to  the  Government  for  the  renewal  of 

its  license  to  use  the  foreshores  for  the 
purpose  of  landing-  its  cables,  the  Government  refused 
the  renewal,  anouncing  that,  in  conjunction  with  the 
Governments  of  several  States  of  Continental  Europe, 
it  had  resolved  to  acquire  and  operate  all  cables  between 
the  United  Kingdom  and  the  neighboring  Continental 
European  countries.^  The  Submarine  Telegraph 
Company  was  forced  to  sell  to  the  Government. 

^Report  from  the  Select  Committee  on  Post  Office  (Telephone 
Agreement),  IQ05  ;  q.  2749  to  2752,  Mr.  H.  B.  Smith,  Permanent 
Secretary  to  Post  Office. 

22  337 


338        THE  TELEPHONE   IN   GREAT   BRITAIN 

In  1896-97,  Mr.  Marconi  by  means  of  a  series  of 
demonstrations  proved  to  the  Post  Office  the  feasibihty 
of  telegraphy  by  means  of  the  use  of  Hertzian  waves, 
Marconi  Patents  Thereupon  the  Post  Office,  through  Sir 
offered  to  State  W.  H.  Preece,  Engineer-in-Chief,  of- 
fered Mr.  Marconi  a  comparatively  small  sum  for  his 
invention.  But  the  Marconi  Wireless  Telegraph  Com- 
pany made  a  much  larger  offer,  and  secured  the  patent 
rights.^  In  the  following  year,  1898,  Mr.  J.  C.  Lamb, 
Assistant  Secretary  to  Post  Office,  argued  before  the 
Select  Committee  on  Telephones  that  the  granting  of 
any  further  telephone  licenses  was  "open  to  the  objec- 
tion that  it  would  encourage  further  inroads  on  the 
Postmaster  General's  Monopoly."  He  said :  "So  long 
as  the  Government  continues  to  give  licenses  for  tele- 
phones, so  long  it  will  lay  the  Postmaster  General's 
monopoly  open  to  attack  on  behalf  of  every  new  inven- 
tion which  comes  into  the  field. "^ 

In  the  year  1902,  the  transmission  of  signals  across 
the  Atlantic  by  means  of  wireless  telegraphy  created  a 
"scare"  among  the  holders  of  shares  in  British  foreign 
submarine  cable  companies.^ 

In  June,  1903,  Mr.  Austen  Chamberlain,  Postmaster 
General,  was  obliged  to  defend  the  Government  against 
the  charge  of  impeding  the  development  of  wireless 
telegraphy.     He  said :     "The  Post  Office  did  every- 

^  The  Electrician,  May  3,  1907;  Mr.  J.  Henniker  Heaton's  testi- 
mony  before   the    Select    Committee    on    Wireless   Telegraphy,    1907. 

'^Report  from  the  Select  Committee  on  Telephones,  1898;  q.  7801. 

^The  Electrician,  September  i,  1905;  Sir  W.  H.  Preece.  Com- 
pare also.  The  Economist,  May  23,  1893. 


THE  WIRELESS  TELEGRAPHY  ACTS     339 

thing  they  could  to  assist  what  they  thouglit  might  be 
a  great  progress  in  civiHzation,  and  they  had  neither 
shown  a  disposition  to  strangle  the  invention  at  its 
birth  nor  to  prevent  its  development  and  success .... 
But  they  had,  however,  desired  not  to  bind  themselves 
to  give  away  the  rights  of  the  Postmaster  General  in 
the  same  way  in  which  they  were  given  away  in  regard 
to  telephones,  before  the  importance  of  telephony  was 
seen.  For  that  action  his  predecessors  and  himself  had 
never  ceased  to  be  criticized,  and  the  Post  Office  had 
still  to  bear  the  burden."^ 

In  August,  1904,  the  Government  carried  the  Wire- 
less Telegraphy  Act,  1904,  which  forbids  the  installa- 
tion and  operation  of  wireless  telegraphy  stations,  ex- 
Wireless  Tele-  cept  under  license  from  the  Postmaster 
graphy  Act,  1904  General.  The  Act  gives  the  Postmas- 
ter General  unqualified  power  to  refuse  to  grant  a 
license.  In  support  of  the  measure,  Lord  Stanley, 
Postmaster  General,  said :  "There  are  two  principles 
that  I  have  endeavored  to  embody  in  this  Bill :  First, 
that  safety  for  the  nation  in  time  of  danger  which 
should  be  secured  by  the  Government  being  allowed  to 
exercise  control  over  wireless  telegraphy ;  and,  secondly, 
that  we  should  not  allow  a  big  monopoly  to  grow  up 
which  at  some  time  the  State  might  have  to  purchase. 
The  advisability  of  securing  the  latter  is  very  obvious 
when  one  regards  the  results  of  the  telephone 
monopoly."^ 

^Hansard's  Parliamentary  Debates;  June  8,  1903,  p.  284. 

-Hansard's  Parliamentary  Debates:  August  12,  1904,  Lord  Stan- 
Icy,  Postmaster  General  :  and  Aricrnst  12,  Lord  Selborne,  moving  the 
Second  Reading  in  the  House  of  Lords. 


340        THE   TELEPHONE    IN    GREAT   BRITAIN 

The  Wireless  Telegraphy  Act,  1904,  was  limited  to 
two  years;  and  in  1906,  it  was  renewed  to  December 
31,  1909.  In  moving  the  Bill  for  the  renewal,  Mr. 
Sydney  Buxton,  Postmaster  General,  said  that  the 
Government  desired  to  prevent  a  monopoly  springing 
up,  as  well  as  to  give  the  Post  Office  and  the  Admi- 
ralty control  over  wireless  telegraphy.  In  the  House 
of  Lords,  the  Earl  of  Granard,  in  charge  of  the  Bill, 
repeated  the  foregoing  statement.^ 

Early  in  1905,  the  Postmaster  General  prepared 
and  issued  for  the  instruction  of  the  public  a  "Model 
Wireless  Telegraphy  License."  That  license  forbade 
rr^.   ,  "the    transmission    by    wireless    teleg- 

Telegraphy  raphy  of  any  telegram  to  or  from  any 

Restricted  British    possession    or   protectorate   or 

foreign  country,  either  directly  or  by  means  of  any 
intermediate  station  or  stations  (whether  on  shore  or 
on  a  ship  at  sea)."  Upon  this  prohibition  The  Elec- 
trician^ commented  as  follows  :  "We  believe  that  should 
it  happen  that  the  Marconi  Company  succeeds  in  the 
near  future  in  sending  commercial  messages  across  the 
Atlantic,  iv  will  be  permitted  to  proceed  with  this  busi- 
nes.<?  under  certain  conditions,  in  view  of  its  pioneer 
work  in  this  direction,  but  that  the  transmission  of 
other  foreign  or  colonial  wireless  telegrams  is  not 
likely  to  be  allowed."  In  the  spring  of  1906  were 
published  the  terms  of  the  agreement  made  in  August, 

^Hansard's  Parliamentary  Debates;  March  26,  1906,  p.  967;  and 
May  18,  1906,  p.  747. 

^  March  17  and  24,  1905. 


THE  WIRELESS  TELEGRAPHY  ACTS  341 

1904,  between  the  Post  Office  and  the  several  Marconi 
Companies.  The  instrument  gives  the  Marconi  Com- 
panies the  right,  for  a  period  of  fifteen  years,  to  trans- 
mit wireless  messages  between  the  United  Kingdom 
and  North  America,  but  adds  that  except  in  the  case 
of  Italy  such  permission  will  not  be  granted  "in  respect 
of  messages  to  or  from  the  Continent  of  Europe."^ 

Sometime  in  the  year  1905,  the  General  Interna- 
tional Wireless  Telegraph  and  Telephone  Company, 
Limited,  applied  for  a  commercial  license  to  install 
Orling-Armstrong  wireless  stations  in  Metropolitan 
London  and  at  Walters  Ash  and  other  places  in  Bucks. 
The  application  was  refused  "on  ground  that  installa- 
tions were  designed  for  the  purpose  of  establishing  ex- 
changes which  would  be  in  contravention  of  the  Post- 
master General's  ordinary  telegraphic  monopoly."^  In 
the  same  year,  the  DeForest  Wireless  Telegraph 
Syndicate  applied  for  a  license  to  install  stations  at 
London,  Manchester,  Liverpool,  Glasgow  and  Belfast, 
"for  communication  for  purposes  of  the  Press."  The 
Postmaster  General  asked  for  further  information,  but 
since  the  DeForest  Syndicate  declined  to  comply  with 
the  request,  the  license  was  not  granted. '"^ 

The  foregoing  facts  show  that  the  Government  pro- 
poses as  far  as  possible  to  limit  the  use  of  wireless 
telegraphy  to  the  transmission  of  messages  between 
shore  stations  and  ships  at  sea ;   that  it  will  permit  the 

'^  The  Electrical  Reviezv ;    May  11,  1906. 
•Parliamentary  Paper,  No.   197,   1906. 
*  Parliamentary  Paper,  No.   197,  1906. 


342        THE   TELEPHONE  IN    GREAT   BRITAIN 

transmission  of  messages  across  the  Atlantic;  but  that 
it  will  not  permit  transmission  between  the  United 
Kingdom  and  Continental  Europe,  in  competition  with 
the  submarine  cables  owned  jointly  by  the  British  Post 
Ofifice  and  the  Governments  of  the  several  States  of 
Continental  Europe,^  Finally,  they  show  that  the 
Post  Office  will  not  permit  overland  wireless  teleg- 
raphy to  compete  generally  with  the  Post  Office  Tele- 
graphs and  Telephones,  though  it  may  conclude  to 
permit  competition  in  the  transmission  overland  of 
newspaper  press  messages.  It  goes  without  saying 
that  the  foregoing  limitations  upon  the  use  of  wireless 
telegraphy  are  prompted  solely  by  the  desire  to  pro- 
tect the  Post  Office  Telegraphs,  Telephones  and  Sub- 
marine Cables;  and  that  they  are  not  required  either 
for  the  purpose  of  securing  the  public  safety  in  time  of 
war,  or  for  the  purpose  of  preventing  neighboring  wire- 
less telegraphy  stations  from  interfering  with  each 
other.  The  public  safety  would  be  fully  secured  by 
inserting  in  each  license  a  clause  authorizing  the  Gov- 
ernment either  to  exercise  censorship  or  to  assume 
actual  operation  in  time  of  war.  Interference  between 
neighbiring  stations  can  be  prevented  by  the  exercise 
of  the  power  to  prescribe  the  location  of  the  several 
wireless  stations,  or  by  prescribing  the  wave-lengths, 
the  wave  energy  and  the  damping  to  be  used  by  the 
several  competing  wireless  telegraphy  companies. 


*  Compare    The   London   Quarterly   Review;   April,    1906,    Mr.    F. 
James. 


THE  WIRELESS  TELEGRAPHY  ACTS     843 

Turning  from  things  large  to  things  small,  one  finds 
the  British  Government  hampering  even  the  Boy  Mes- 
senger and  District  Service  Companies,  in  its  desire  to 
Petty  Pro-  protect  the  several  Post  Office  monop- 

tective  Measures  olies.  In  April,  1891,  Mr,  Cecil  Raikes, 
Postmaster  General,  stated  that  the  Government  had 
brought  action  against  those  companies  for  infringe- 
ment of  the  Postmaster  General's  monopoly;  and  that 
subsequently  it  had  licensed  the  companies  on  the  fol- 
lowing conditions.  The  companies  were  not  to  em- 
ploy the  telephone,  they  were  to  pay  $125  a  year,  and 
60  cents  per  call  box  in  use.  Finally,  a  two  cent  stamp 
must  be  affixed  to  every  letter  delivered  by  messenger; 
and  no  messenger  must  take  more  than  six  letters  at  a 
time  from  one  sender.^ 

In  May,  1904,  Colonel  Lockwood,  M.  P.,  stated  that 
the  Manager  of  the  London  District  Messenger  Serv- 
ice recently  had  brought  from  the  United  States  a  mes- 
senger call  box  with  telephone  attachment.  At  pres- 
ent one  could  only  ring  for  a  messenger  and  must  then 
sit  down  and  wait  to  learn  whether  a  messenger  would 
come.  With  the  American  call  box  in  use,  one  would 
be  able  to  telephone  to  the  office  to  ascertain  whether 
or  not  a  messenger  could  be  sent.  But  the  Postmaster 
General  had  refused  to  permit  the  use  of  the  American 
call  box.  The  Postmaster  General,  Lord  Stanley,  re- 
plied that  he  would  reconsider  the  matter;  but  he  was 
very  much  afraid  of  "the  thin  edge  of  the  wedge,"  and 
viewed  all  such  innovations  with  the  greatest  suspicion.* 

^Hansard's  Parliamentary  Debates;  April  16,  1891,  p.  683. 
-Hansard's  Parliamentary  Debates;  May  12,   1904,  pp.    1260  and 
1267. 


344        THE   TELEPHONE   TN    GREAT    BRITAIN 

Many  things  change  and  pass  away;  but  the  spirit 
of  the  State  Monopoly  changes  not.     "In  the  reign  of 

;.,    ,       .  Charles  II,  an  enterprising  citizen  of 

Unchanging  '  ^  ° 

Spirit  of  State  London,  William  Dockwra,  set  up  at 
Monopoly  great  expense  a  penny  post  which  de- 

livered letters  and  parcels  six  or  eight  times  a  day  in 
the  busy  and  crowded  streets  near  the  Exchange,  and 
four  times  a  day  in  the  outskirts  of  the  capital.  The 
improvement  was,  as  usual,  strenuously  resisted .... 
The  utility  of  the  enterprise  was,  however,  so  great 
and  obvious  that  all  opposition  proved  useless.  As 
soon  as  it  l^ecame  clear  that  the  speculation  would  be 
lucrative,  the  Duke  of  York  complained  of  it  as  an  in- 
fraction of  his  monopoly,  and  the  Courts  of  Law  de- 
cided in  his  favor."^ 

Before  concluding,  mention  should  be  made  of  an- 
other bit  of  testimony  given  by  Sir  W.  H.  Preece 
before  the  Select  Committee  on  Wireless  Telegraphy, 
1907.2  Said  Sir  W.  H.  Preece  :  "I  have  not  the  slight- 
est doubt  about  it ...  .  the  wdiole  effect  of  the  Marconi 
Company  has  been  to  check,  and  really  to  stop,  the 
growth  of  wireless  telegraphy,  both  as  a  convenience 
to  navigation  and  as  a  commercial  undertaking."  The 
witness  was  referring  to  the  fact  that  the  Marconi  In- 
ternational Marine  Communication  Company  had 
made  with  Lloyds  a  fourteen  year  contract  binding  the 

^  The  Daily  Graphic;  December  26,  1906,  Mr.  Harold  Cox,  M.  P., 
quotes   from   Macaulay's  History  of  England. 
-The  Electrician;  May  10,  1907. 


THE  WIRELESS  TELEGRAPHY  ACTS  345 

Lloyds  signal  stations  to  refuse  to  hold  communication 
with  vessels  employing  any  wireless  telegraphy  system 
other  than  the  Marconi  system.  If,  for  argument's  sake. 
Sir  W.  H.  Preece's  criticism  be  accepted  as  sound,  the 
policy  of  the  Marconi  Company  still  fails  to  constitute 
an  argument  in  favor  of  public  ownership.  For  noth- 
ing is  to  be  gained  by  substituting  public  ownership  for 
private  ownership,  if  public  ownership  is  to  develop  the 
shortcomings  and  failings  of  private  ownership,  in  ad- 
dition to  its  own  peculiar  shortcomings  and  failings. 

One  of  the  noteworthy  facts  about  the  restrictions 
put  upon  the  use  of  wireless  telegraphy  by  the  Post- 
master General,  was  the  acceptance  of  those  restrictions 
with  very  little  protest  either  from  the 
wireless  telegraphy  companies  or  from 
citizens  anxious  about  the  industrial  progress  of  Great 
Britain.  Those  who  felt  either  an  interested  or  a  dis- 
interested prompting  to  protest,  realized  that  nothing 
would  be  gained  by  yielding  to  the  prompting.  With 
the  general  public  the  presumption  in  the  State's  favor 
was  too  strong  to  be  shaken.  The  main  reason  why 
that  presumption  was  so  strong,  was  the  unfair  criti- 
cism that  for  years  past  had  been  passed  upon  the  Na- 
tional Telephone  Company  by  many  statesmen  of  local 
and  national  fame.  Even  the  brief  speeches  upon  the 
subject  of  wireless  telegraphy  made  by  Mr.  Austen 
Chamberlain,  Postmaster  General,  and  by  Lord  Stan- 
ley, Postmaster  General,  had  not  been  free  from  inac- 


;Mn        THE   TELEPHONE  IN   GREAT   BRITAIN 

curate  but  most  effective  allusions  to  the  National 
Telephone  Company.  Mr.  Austen  Chamberlain  had 
said  the  Government  had  "desired  not  to  bind  them- 
selves to  give  aw^ay  the  rights  of  the  Postmaster  Gen- 
eral in  the  same  way  in  which  they  were  given  away 
in  regard  to  telephones,  before  the  importance  of 
telephony  was  seen."  As  a  matter  of  fact,  the  rights  of 
the  Postmaster  General  never  were  "given  away."  In 
1 88 1  the  Postmaster  General  waived  his  monopoly 
rights  in  consideration  of  the  fact  that  the  owners  of 
the  telephone  patents  waived  their  right  to  appeal  from 
the  decision  of  Mr.  Justice  Stephen ;  and  in  considera- 
tion of  the  further  fact  that  the  telephone  companies 
agreed  to  pay  the  Post  Office  ten  per  cent,  of  their 
gross  receipts.  The  relaxation  of  restrictions  in  1884 
was  not  made  by  way  of  a  gift  to  the  telephone  com- 
panies, but  in  response  to  the  public  demand  for  a  more 
adequate  telephone  service.  The  transactions  between 
the  Government  and  the  National  Telephone  Company 
in  1892,  1901  and  1905  were  so  overwhelmingly  in 
favor  of  the  State  as  to  amount  almost  to  what  we 
Americans  term  the  taking  of  property  without  due 
process  of  law.  Lord  Stanley  had  said :  "  .  . .  .we  should 
not  allow  a  big  monopoly  to  grow  up  which  at  some 
time  the  State  might  have  to  purchase.  The  advisability 
of  securing  the  latter  is  very  obvious  when  one  regards 
the  results  of  the  telephone  monopoly."  The  monopoly 
of  the  National  Telephone  Company  from  1892  on  was 
a  qualified  one;  it  being  qualified  by  the  fact  that  the 


THE  WIRELESS  TELEGRAPHY  ACTS     347 

State  held  over  the  Company  the  threat  of  competition 
from  the  municipahties  or  from  the  Post  Office  itself, 
should  the  Company  neglect  its  public  duty  or  abuse 
its  position  of  qualified  monopoly.  Nor  had  any  per- 
son ever  succeeded  in  showing  that  the  qualified 
monopoly  held  by  the  National  Telephone  Company 
had  worked  adversely  to  the  public  interest.  The  al- 
leged necessity  of  the  State  purchasing  the  property  of 
the  National  Telephone  Company  in  no  way  rested 
upon  the  manner  or  the  spirit  in  which  the  National 
Telephone  Company  had  discharged  its  duties  to  the 
public.  That  alleged  necessity  rested  upon  the  desire 
of  the  State  to  acquire  the  profits  of  the  business  which 
the  Company  had  upbuilt ;  and  the  resolve  of  the  Gov- 
ernment to  yield  to  the  misinformed  public  opinion 
which  Great  Britain's  municipal  and  national  states- 
men had  produced. 


CHAPTER  XX 

CONCLUSION 

In  a  number  of  important  respects  the  story  of  Great 
Britain's  telephone  policy  resembles  the  story  of  muni- 
cipal ownership  in  Great  Britain.  In  the  first  place, 
there  is  the  inability  of  either  State  or  Municipality  to 
take  up  an  invention  and  develop  it  from  a  successful 
laboratory  device  to  an  established  industry.  In  the 
fields  of  gas-lighting,  horse  street  railway  transporta- 
tion, electric  lighting,  electric  street  railway  transporta- 
tion and  the  so-called  generation  of  electricity  in  bulk, 
the  Municipality  deliberately  left  to  private  enterprise 
the  pioneer  work  of  establishing  the  industry.  Simi- 
larly the  State  refused  to  take  up  the  telephone.  Sub- 
sequently it  failed  to  cooperate  permanently  with  the 
inventor  who  first  promised  to  put  wireless  telegraphy 
to  commercial  use.  The  main  reasons  for  this  fatal 
defect  of  the  policy  and  practice  of  public  ownership 
have  been  the  unwillingness  of  the  municipal  and  na- 
tional statesmen  to  speculate  with  the  taxpayer's 
monies;  and  the  inability  of  those  statesmen  to  resist 
the  illegitimate  demands  made  upon  them  the  moment 
they   enter   upon   industrial    ventures    that   touch    the 

"pocket-book   nerves"    of   their    constituencies.      The 

348 


CONCLUSION  349 

municipal  and  national  statesmen  know  that  the  taking 
hold  of  an  invention  always  is  a  speculation,  and  often- 
times is  a  gamble.  They  will  not  speculate  with  the 
public  funds,  no  matter  how  legitimate  the  cause;  for 
failure  would  give  their  political  opponents  too  good 
an  opportunity  to  ride  into  power.  They  know  also 
that  the  pioneer  work  of  upbuilding  a  new  industry 
can  be  undertaken  only  by  men  who  are  in  the  position 
to  act  with  an  eye  single  to  the  business  aspects  of  their 
venture;  that  it  cannot  be  undertaken  by  men  whose 
first  business  ever  must  be  to  consider  the  exigencies  of 
politics. 

But  although  the  State  and  the  Municipality  cannot 
upbuild  a  new  industry,  they  have  enunciated  and  en- 
forced the  doctrine  that  when  an  industry  is  "ripe,"  it 
must  be  made  to  fall  into  "the  public's  lap."  They  have 
established  the  doctrine  that  the  public  may  take  the 
"ready  made"  industry  at  the  cost  of  the  replacement 
of  the  plant,  and  with  no  allowance  to  the  industrial 
pioneer  for  past  losses  or  the  prospect  of  future  profits. 
Reduced  to  simple  terms,  this  doctrine  is,  that  the  in- 
dustrial pioneer  renders  society  no  service  for  which 
society  ought  to  pay  him.  In  its  effect,  it  is  one  of  the 
greatest  blows  at  industrial  progress  that  ever  the  pub- 
lic authority  has  struck  in  Great  Britain.  For  the 
doctrine  destroys  private  initiative,  which  public  initia- 
tive cannot  replace. 

In  support  of  this  doctrine,  which  already  has 
hampered   enormously   Great   Britain's   industrial   de- 


350        THE   TELEPHONE   IN    GREAT    BRITAIN 

velopment,  the  Municipalities  cite  the  fact  that  they 
were  made  to  pay  heavily  for  the  "future  prospects" 
of  the  water  works  and  gas  works  which  they  bought 
"ready  made,"  with  an  established  clientelage,  a  trained 
staff  and  a  highly  developed  engineering  art  and  science. 
They  say  that  the  latter  things  are  not  "tangible  assets." 
They  ignore  the  fact  that  the  subsequent  growth  of 
the  cities  justified  the  price  paid  for  the  future  pros- 
pects of  the  water  works  and  gas  plants.  The  State 
alleges  that  it  was  made  to  pay  an  "exorbitant"  price 
for  the  telegraphs,  overlooking  the  fact  that  it  paid  it 
with  its  eyes  open.  It  overlooks  the  fact  that  it  paid  a 
high  price  because  it — that  is,  the  Disraeli  Govern- 
ment— was  playing  the  great  game  of  politics  when  it 
inaugurated  the  policy  of  State  telegraphs  in  1868.  It 
overlooks  the  fact  that  in  consequence  of  the  growth  of 
industry  and  population  after  1870,  the  purchase  of 
the  telegraphs  would  have  proved  a  good  bargain,  had 
not  every  Ministry  from  1870  on  permitted  the  exi- 
gencies of  politics  to  play  a  prominent  part  in  the  ad- 
ministration of  the  State  telegraphs. 

The  State  and  the  Municipality  also  have  developed 
the  doctrine  that  once  the  public  authority  has  pur- 
chased a  "ready  made"  industry,  that  industry  must  be 
protected  against  competition  from  new  and  rival  in- 
dustries. The  desire  to  protect  the  municipal  gas 
plants  from  the  electric  light  was  an  important  con- 
sideration in  the  enactment  of  the  Electric  Lighting 
Act,  1882,  which  for  six  long  years  excluded  from  the 


CONCLUSION  351 

United  Kingdom  the  central  electric  light  station. 
Since  1898,  the  desire  to  protect  the  local  municipal 
electric  light  plants  has  been  permitted  to  impede  the 
spread  of  the  so-called  electricity-in-biilk  generating 
and  distributing  companies.  The  desire  to  protect  the 
State  telegraphs  from  the  telephone,  led  to  the  impo- 
sition of  the  restrictions  incorporated  in  the  telephone 
licenses  of  1881  and  1884;  it  led  to  the  denial,  down  to 
1892,  of  all  way-leaves  in  the  streets;  and  it  led  to  the 
compulsory  sale  of  the  long-distance  telephone  lines  in 
1892.  More  recently  the  desire  to  protect  the  State 
telegraphs  and  the  long-distance  telephone  service,  has 
led  the  State  to  prohibit  the  sending  of  overland  wire- 
less telegraphy  messages,  except  for  experimental  pur- 
poses and  for  the  newspaper  press.  At  the  same  time 
the  desire  to  protect  the  State's  interest  in  the  submarine 
cables  to  France,  Germany  and  Holland  has  led  the 
Government  to  insert  in  the  "Model  License"  the  pro- 
hibition of  the  use  of  wireless  telegraphy  apparatus  "for 
the  transmission  of  any  telegram  to  or  from  any  Brit- 
ish possession  or  protectorate  or  foreign  country,  either 
directly  or  by  means  of  any  intermediate  station  or 
stations,  whether  on  shore  or  on  a  ship  at  sea." 

In  passing,  it  may  be  added  that  it  goes  without  say- 
ing that  individuals  and  companies  use  the  monopoly 
rights  conferred  by  British  patent  law  in  the  same 
spirit  in  which  the  State  has  used  the  monopoly  con- 
ferred by  the  Telegraph  Act,  1869.  But  the  monopoly 
conferred  by  the  patent  law  is  limited  to  fourteen  years, 
whereas  the  telegraph  monopoly  is  perpetual. 


352        THE  TELEPHONE  IN   GREAT   BRITAIN 

Great  power,  wherever  lodged,  is  liable  to  be  abused. 
The  only  protection  against  that  grave  danger  lies  in 
the  slow  and  laborious  process  of  upbuilding  a  public 
opinion  that  shall  be  so  honest  and  intelligent  that 
power  cannot  be  abused,  no  matter  where  lodged.  The 
United  Kingdom's  experience  under  State  ownership 
and  municipal  ownership  adds  one  more  instance  to  the 
long  series  of  instances  proving  that  legislation  cannot 
take  the  place  of  education.  The  practice  of  municipal 
ownership  has  transferred  to  the  Association  of  Mu- 
nicipal Corporations,  which  has  been  aptly  termed  a 
trade  union  of  Town  Clerks,  the  political  power  once 
held  by  the  municipal  public  service  companies.  The 
present  Lord  Chief  Justice  of  England,  Lord  Alver- 
stone,  on  the  strength  of  sixteen  years'  experience  as  a 
Member  of  the  House  of  Commons,  has  said  that  "only 
those  who  had  been  in  the  House  of  Commons  knew 
the  really  almost  unfair  weight  and  power  which  muni- 
cipal bodies  had  in  the  House.  .  .  .Without  fear  of  con- 
tradiction he  could  say  that  the  question  [before  the 
House]  under  those  circumstances  [of  intervention 
by  the  Association  of  Municipal  Corporations]  was 
not  fairly  determined  upon  its  merits,  and  was  not 
fairly  discussed.  Being  no  longer  in  politics  he  had 
no  right  to  express  any  opinion  upon  the  merits  of  the 
case  [municipal  ownership],  beyond  saying  that  it  was 
a  question  of  sucK  vast  importance  tfiat  it  ought  to  be 
thoroughly  understood  and  tested  upon  its  merits  and 
not  dealt  with  by  any  considerations  of  popularity, 
public  sentiment,  or  anything  of  that  kind." 


CONCLUSION  353 

In  1892,  the  Association  of  Municipal  Corporations 
compelled  the  Government  to  give  the  municipalities 
the  power  to  veto  the  exercise  of  any  way-leave  powers 
that  the  Postmaster  General  should  see  fit  to  let  the 
telephone  companies  have.  The  Government  yielded 
reluctantly,  for  the  municipalities  had  misused  not  only 
the  power  of  veto  given  them  by  the  Tramways  Act, 
1870,  but  even  the  power  of  provisional  veto  given 
them  by  the  Electric  Lighting  Act  of  1888.  From 
1892  to  1896,  the  municipalities  persisted  in  the  futile 
attempt  to  use  their  power  of  veto  for  the  purpose  of 
compelling  the  National  Telephone  Company  to  per- 
mit them  to  fix  the  Company's  tariffs.  With  that 
effort,  the  Government  itself  did  not  sympathize. 

No  one  would  deny  that  the  policy  of  private  owner- 
ship gives  rise  to  grave  abuses  in  a  community  in  which 
public  opinion  is  not  ever  watchful  as  well  as  intelligent, 
to  say  nothing  of  the  community  in  which  there  is  more 
or  less  personal  corruption  among  municipal  and  na- 
tional statesmen,  as  well  as  among  business  men  and 
financiers.  On  the  other  hand,  the  experience  of  Great 
Britain  teaches  that  equally  grave  abuses  are  possible 
under  the  policy  of  public  ownership,  if  public  opinion 
is  not  ever  watchful  and  intelligent.  Such  abuses  are 
possible  even  in  the  absence  of  statesmen  who  insist  on 
being  bribed,  and  of  business  men  and  financiers  who 
are  willing  to  practice  bribery.  The  blindness  of  the 
British  people  to  their  interests  as  consumers  of  the 
23 


354        THE   TELEPHONE  IN   GREAT   BRITAIN 

services  offered  by  the  public  service  companies  has 
been  astounding;  and  the  misuse  of  power  on  the  part 
of  the  Government  and  the  Municipahties  has  been  no 
less  astounding.  In  1884,  1885  and  1888,  the  British 
Government,  desiring  to  protect  its  telegraphs  against 
competition  from  the  telephone,  refused  to  permit  Par- 
liament even  to  consider  the  telephone  companies'  ap- 
lications  for  w^ay-leaves  in  the  streets.  In  the  years 
1892  to  1895,  the  Association  of  Municipal  Corpora- 
tions persuaded  all  but  three  of  the  municipalities  in 
the  United  Kingdom  not  to  let  the  National  Telephone 
Company  have  any  way-leaves  in  the  streets.  The 
citizens  of  Glasgow  permitted  a  handful  of  municipal* 
statesmen  to  persuade  them  not  to  permit  the  National 
Telephone  Company  to  make  its  service  in  Glasgow 
either  adequate  or  efficient.  The  statesmen  in  question 
wished  the  service  to  remain  inadequate  and  inefficient, 
in  order  that  they  might  use  the  resulting  popular  dis- 
satisfaction for  the  purpose  of  forcing  the  Government 
to  abandon  its  policy  of  not  granting  municipalities 
telephone  licenses.  The  conduct  of  the  municipalities 
down  to  the  close  of  1895  reminds  one  of  the  period 
which  came  to  a  close  with  the  enactment  of  the  Cor- 
porations Act  of  5  and  6  William  IV.  In  that  period 
the  municipal  corporations,  in  spite  of  the  splendid 
services  which  they  had  rendered  in  some  directions, 
had  been  "the  lurking  places  of  narrow  prejudices, 
flagrant  abuses,  and  ignorant  restrictions;  so  much  so 
that   at  the   time  of  the   inquiry   into   the   Municipal 


CONCLUSION  355 

Corporations  prior  to  the  new  Corporations  Act  of 
5  and  6  William  IV.,  it  was  a  saying  that  for  a 
town  to  be  without  a  charter  was  to  be  without 
a  shackle,  and  it  was  seriously  contended  that  the 
prosperity  of  such  communities  as  Birmingham  was 
due  to  the  fact  that  they  had  no  Corporation  to  repress 
their  industries,  and  had  been  governed  like  the  villages 
by  the  Justices  of  the  Peace.  That  there  was  ground 
for  such  criticism  was  proved — to  take  a  well-known 
example — by  the  way  the  inventor  of  the  steam  engine 
was  treated  by  the  Corporation  of  Glasgow.  Because 
he  was  not  a  member  of  the  Hammermen's  Guild,  they 
refused  to  allow  him  to  put  up  his  forge  for  experi- 
mental purposes  in  the  city,  and  it  is  quite  possible  that 
had  it  not  been  for  the  liberality  of  the  University, 
whose  precincts  were  outside  the  city  jurisdiction,  and 
who  gave  Watt  a  refuge  there,  this  bigoted  interference 
of  Municipal  Government  might  have  deprived  the 
British  people  of  their  supremacy  in  steam  engineering 
as  effectively  as  the  meddlesomeness  of  their  modern 
successors  has  destroyed  their  prospect  of  obtaining 
that  footing  in  the  electrical  world  which  was  their 
just  inheritance."^ 

Upon  inquiring  how  was  made  the  public  opinion 
that  permitted  the  Government  and  the  Municipalities 
so  to  abuse  their  powers,  one  finds  as  follows :  Down 
to  the  amalgamation  of  the  telephone  companies  In 
1889-90,    with    its   injection   of   some   $6,000,000   of 

*  Dixon  H.  Davies :  English  Local  Government,  its  Advantages 
and  Defects,  published  by  the  London  Municipal  Society. 


356        THE    TELEPHONE  IN    GREAT   BRITAIN 

"water"  into  a  capitalization  representing  an  actual 
expenditure  of  some  $9,000,000,  public  opinion  was 
made  mainly  by  two  factors.  The  first  was  the  errone- 
ous opinion  that  the  financial  failure  of  the  experiment 
of  national  telegraphs  had  been  caused  by  the  high  price 
paid  for  the  telegraphs.  The  second  factor  was  the 
public  prejudice  against  public  service  companies  of 
every  kind,  which  prejudice  had  been  created  by  the 
advocates  of  the  municipalization  of  the  so-called 
municipal  public  service  industries.  The  public  had 
heard  so  much  about  the  necessity  of  the  City  retaining 
an  absolutely  exclusive  interest  in  the  streets,  and  the 
undesirability  of  admitting  "dividend  seeking"  com- 
panies, that  it  allowed  the  municipal  statesmen  to  coop- 
erate wth  the  Government  in  excluding  even  the  Post 
Office's  licensees,  the  telephone  companies.  When  those 
arguments  were  presented  to  the  Commissioner  ap- 
pointed to  inquire  into  the  telephone  service  at  Glas- 
gow, he  denominated  them  "somewhat  high-flown  talk," 
"absurd"  and  "self-condemned."  He  pointed  out  that 
there  was  much  confusion  in  the  public  mind  as  to  the 
nature  of  the  public's  property  in  the  streets.  That 
"the  solum,  or  the  property  in  the  land  traversed  by  the 
streets,  as  a  rule,  belongs  to  the  proprietors  on  each 
side,  and  the  streets  are  only  vested  in  the  Corporation 
by  Act  of  Parliament  for  certain  public  purposes,  the 
main  one  being  the  use  of  the  surface  for  public  traffic, 
and  the  subsidiary  purposes  being  such  as  the  construc- 
tion of  sewers  and  the  laying  of  gas  and  water  pipes," 


CONCLUSION  357 

and  ''that  everything  beyond  that  remains  the  property 
of  the  abutting  owners."  In  the  case  of  the  Postmas- 
ter General  versus  the  City  of  London,  Mr.  Justice 
Wright,  in  an  obiter  dictum,  said  that  in  his  opinion 
the  objections  which  the  municipahties  had  a  right  to 
raise  against  the  streets  being  opened  for  the  purpose 
of  laying  telephone  wires  must  be  objections  which 
concerned  them  as  the  road  authority,  that  is,  as  the 
guardians  of  the  rights  and  the  convenience  of  the  pub- 
lic as  users  of  the  streets. 

After  the  telephone  company  amalgamations  of 
1889-90,  public  opinion  was  influenced  very  largely  by 
the  erroneous  opinion  that  the  National  Telephone 
Company  was  making  unduly  large  profits  upon  the 
money  actually  invested,  and  that,  therefore,  the  tele- 
phone charges  were  too  high.  That  opinion  was 
launched  by  the  Duke  of  Marlborough  as  the  promoter 
of  a  competing  telephone  company;  and  subsequently 
it  was  kept  alive  by  the  London  County  Council,  the 
City  of  London,  Glasgow  and  other  municipalities  that 
wished  to  compel  the  Government  to  permit  them  to 
install  municipal  telephone  exchanges.  Under  those 
circumstances  public  opinion  permitted  the  municipali- 
ties to  persist  from  1892  to  1896  in  the  policy  of  with- 
holding way-leaves  from  the  National  Telephone  Com- 
pany, for  the  purpose  of  compelling  that  company  to 
submit  to  the  municipalities  fixing  the  telephone 
charges. 

Political  expediency  was  the  main  factor  in  the  adop- 


358        THE   TELEPHONE  IN   GREAT   BRITAIN 

tion  of  the  policy  of  State  telegraphs  in  1868  and  1869. 
It  was  the  main  factor  in  the  failure  of  successive 
Governments  to  amend  the  Tramways  Act,  1870,  after 
the  defects  of  that  Act  had  been  fully  established.  It 
was  the  main  factor  not  only  in  the  enactment  of  the 
Electric  Lighting  Act,  1882,  but  also  in  the  Board  of 
Trades'  interpretation  and  administration  of  the 
Amending  Electric  Lighting  Act  of  1888.  But  greater 
and  more  unjustifiable  concession  was  made  to  political 
expediency  in  1898  and  1899,  than  had  been  made  at 
any  previous  time.  In  1898,  the  Salisbury  Ministry 
permitted  one  of  its  Members,  Mr.  R,  W.  Hanbury, 
Financial  Secretary  to  the  Treasury,  to  make  himself 
the  Parliamentary  champion  of  the  municipal  states- 
men that  demanded  that  the  Government  abandon  its 
past  policy  of  refusing  to  grant  the  municipalities  tele- 
phone licenses.  Mr.  Hanbury  so  skilfully  played  upon 
the  popular  misconceptions  concerning  the  National 
Telephone  Company,  that  he  succeeded  in  overthrowing 
the  policy  which  his  Party  had  established  in  1892.  In 
the  words  of  Sir  William  Vernon-Harcourt,  Chancellor 
of  the  Exchequer  from  1892  to  1895,  that  policy  had 
been  to  make  the  National  Telephone  Company  "the 
temporary  agents"  of  the  Government  until  the  Post 
Office  should  assume  the  entire  telephone  business,  on 
December  31,  191 1.  Provided,  that  the  Government 
could  find  other  agents,  should  the  National  Telephone 
Company  acquit  itself   unsatisfactorily.*      Under   the 

^Hansard's  Parliamentary  Debates;  March  i,  1895,  p.  235.     Com- 
pare also  the  statements  of  The  Economist  of  April  2,  June  4  and 


CONCLUSION  359 

guidance  of  Mr.  Hanbury,  the  Select  Committee  on 
Telephones,  1898,  reported  that  public  necessity  and  con- 
venience demanded  that  either  the  Government  or  the 
Municipalities  should  enter  upon  immediate,  all-round 
and  effective  competition  with  tlie  National  Telephone 
Company.  The  Report  of  the  Committee  and  the  re- 
sulting Telegraphs  Act,  1899,  knocked  25  per  cent,  off 
the  value  of  the  securities  of  the  National  Telephone 
Company;  and  promoted  Mr.  Hanbury  to  a  Cabinet 
Office  in  the  reorganization  of  the  Salisbury  Ministry 
in  November,  1900.  In  all  other  respects  the  Act  of 
1899  was  an  utter  failure. 

In  1901  and  1905,  respectively,  the  Government 
attained  the  object  at  which  it  had  aimed  ever  since 
1 88 1,  namely,  the  right  to  purchase  on  December  31, 
191 1,  at  cost  of  replacement,  and  with  no  allowance 
for  earning  power,  the  property  of  the  National  Tele- 
phone Company. 

In  the  year  1906,  one  person  in  every  one  hundred 
and  five  persons  in  the  United  Kingdom  was  a  sub- 
scriber to  the  telephone.  On  January  i,  1907,  one 
person  in  every  twenty  persons  in  the  United  States 
was  a  subscriber  to  the  telephone.  With  every  possible 
allowance  for  the  so-called  conservatism  of  England 
and  Scotland,  one  cannot  escape  the  conclusion  that 
Great  Britain  is  very  far  from  the  position  whicli  it 

July  30,  1892,  to  the  effect  that  the  Government  proposed  to  enter 
into  a  co-partnership  with  the  National  Telephone  Company. 


360        THE   TELEPHONE  IN   GREAT   BRITAIN 

might  attain  were  free  scope  given  to  British  captains 
of  industry  and  financiers. 

The  National  Telephone  Company  never  has  been  in 
a  position  to  pursue  very  actively  the  policy  of  popular- 
izing the  telephone.  The  uncertainty  as  to  what  would 
become  of  its  property  after  December  31,  191 1,  always 
has  set  very  definite  limits  to  the  amount  of  money  that 
it  could  raise;  and  those  limits  have  been  very  much 
this  side  of  the  sum  that  would  have  been  required  to 
give  telephone  service  to  one  in  every  twenty  of  the 
inhabitants  of  the  United  Kingdom.  Again,  the  tele- 
phone cannot  be  brought  into  very  extensive  use,  ex- 
cept on  the  system  of  a  reasonably  low  toll  service.  On 
the  other  hand,  reasonably  low  toll  rates  cannot  be 
given  under  the  retention  of  the  unlimited  user  service ; 
upon  that  point  all  telephone  experts  are  in  agreement. 
The  National  Telephone  Company's  position  always 
has  been  so  insecure  that  the  Company  has  been  unable 
to  brave  public  opinion  to  abolish  the  unlimited  user 
service.  Therefore  it  has  been  unable  to  establish  such 
measured  service  rates  as  would  have  brought  the  tele- 
phone into  much  more  general  use. 

In  1904,  when  the  Company's  license  had  only  seven 
more  years  to  run,  the  Company  practically  had  reached 
the  end  of  its  credit.  The  investing  public  would 
furnish  no  more  money  on  a  license  of  only  seven  more 
years  of  life.  Under  the  agreement  reached  in  1905, 
the  Government  has  agreed  to  provide  additional  ex- 
change facilities  and  subscribers'  lines  on  annual  rental, 


CONCLUSION  361 

but  the  terms  are  such  that  the  Geueral  Manager  of  the 
Company  has  said  that  the  Company  will  make  only  a 
somewhat  restricted  use  of  the  Government's  offer. 
The  Chairman  of  the  Company  has  added  that  the 
Company  will  make  no  further  effort  to  develop  busi- 
ness that  requires  time  and  nursing,  but  will  limit  itself 
to  investments  that  will  prove  remunerative  from  the 
start.  Moreover,  the  Company  still  labors  under  the 
inability  to  abolish  the  unlimited  user  service.  There 
is,  therefore,  no  prospect  of  the  telephone  coming  into 
such  general  use,  between  now  and  December  31,  191 1, 
as  it  might  come  into,  were  English  captains  of  industry 
and  financiers  given  a  free  hand. 

The  injury  done  to  the  people  of  Great  Britain  by 
the  telephone  policy  of  the  Government  and  the  Munici- 
palities by  no  means  is  limited  to  the  restriction,  past 
and  future,  of  telephone  facilities.  The  compulsory 
sale  of  the  trunk  lines  in  1892,  with  no  allowance  for 
good-will;  the  violation,  in  1899,  of  "the  equity  of  the 
understanding"  reached  in  1892,  when  the  Government 
to  all  intents  and  purposes  entered  into  a  partnership 
with  the  National  Telephone  Company;  and  the 
numerous  demonstrations  that  neither  Parliament  nor 
the  Government  will  be  a  bulwark  against  misguided 
public  opinion,  when  such  public  opinion  is  directed 
against  public  service  companies  that  require  way-leaves 
in  the  public  streets;  seriously  have  shaken  the  faith 
of  British  captains  of  industry  and  financiers  in  the 


362        THE   TELEPHONE  IN   GREAT   BRITAIN 

inviolability  of  the  rights  of  private  property  where 
such  property  is  dependent  upon  the  right  to  use  the 
streets,  or  where  the  interests  of  private  property  con- 
flict with  the  interests  of  the  State  and  the  Municipality 
as  the  owners  and  operators  of  trading  ventures. 

Every  violation  of  the  rights  of  private  property 
strikes  at  the  very  springs  of  progress.  None  does  so 
more  surely  and  fatally  than  does  the  violation  of  the 
rights  of  the  inventor  and  of  the  person  who  under- 
takes the  hazardous  task  of  developing  an  invention 
from  an  ingenious  mechanical  device  or  scientific  toy 
into  a  paying  machine  or  article  of  trade  in  daily  use 
with  hundreds  of  thousands  of  people  stretching  from 
the  largest  cities  to  the  remotest  villages.  Upon  this 
point,  one  can  quote  no  better  authority  than  Lord 
Avebury  (formerly  Sir  John  Lubbock),  who,  through- 
out his  long  and  singularly  busy  life,  has  concerned 
himself  with  the  commercial  development  of  inventions. 
Says  Lord  Avebury:  "Capitalists  are  to  a  great  ex- 
tent the  brains  of  industry.  Thinking  is  the  hardest 
work  a  man  can  do.  Even  when,  as  has  often  happened, 
the  workman  of  genius  makes  an  important  suggestion 
or  an  ingenious  invention,  he  has  always  found  the  need, 
not  only  of  capital,  but  of  the  capitalist.  It  is  the 
capitalist  who  organizes  manufactures.  Hargreaves 
and  Arkwright  made  almost  the  same  invention. 
Hargreaves  found  no  capitalist  to  help  him,  and  died 
poor;    Arkwright    found    Strutt,    and    died    rich."^ 

^  Lord  Avebury:     On  Municipal  and  National   Trading,  p.    150. 


CONCLUSION  363 

Again :  "All  those  who  have  had  to  do  with  patents 
know  how  risky  they  are.  For  one  patent  which  gives 
a  profit,  ten  leave  a  loss.  .  .  .  That  is  a  reason  why  we 
should  ask  the  Government  to  deal  fairly  and  even  liber- 
ally w'ith  patents  of  this  kind^  (/.£?.^  the  National  Tele- 
phone Company).  Lord  Avebury  added  that  the  orig- 
inal investors  in  National  Telephone  Company  stock 
were  receiving  only  7  per  cent,  on  their  money. 

Upward  of  thirty-five  years  of  experience  has  shown 
that  inventors  will  not  find  their  Strutt  in  either  the 
British  Government  or  the  British  Municipalities.  That 
those  bodies  are  mere  imitators,  incapable  of  contrib- 
uting any  thing  to  industrial  progress.  And  yet,  those 
bodies  hunger  after  the  rewards  so  rarely  reaped  by 
those  who  do  undertake  to  contribute  to  industrial 
progress,  at  the  cost  of  great  labor  and  anxiety.  Their 
creed  was  enunciated  in  1899  by  Mr.  R.  W.  Hanbury, 
Financial  Secretary  to  the  Treasury,  and  Representa- 
tive of  the  Postmaster  General  in  the  House  of  Com- 
mons. Mr.  Hanbury's  statement  was,  that  it  would 
be  folly  for  a  public  authority  to  pay  the  market  price 
for  an  industry  "ready  made,"  since,  by  the  exercise  of 
the  power  to  legislate,  the  industry,  when  ripe,  could 
be  made  to  drop  into  the  public's  lap.- 

The  break-down  of  public  opinion  in  consequence  of 
the  failure  of  the  public  to  discern  its  long-run  inter- 

^  Hansard's  Parliamentary  Debates;  June  20,    1899,  p.   135;    and 
March  6,  1890,  p.  141 5,  Sir  John  I.ubbock  (now  Lord  Avebury). 
"Hansard's  Parliamentary  Debates;  June  20,  1899. 


3t)4        THE   TELEPHONE  IN   GREAT   BRITAIN 

ests,  has  been  the  principal  factor  that  has  shaped  Great 
Britain's  telephone  policy ;  just  as  it  has  been  the  main 
factor  that  has  shaped  the  working  of  the  practice  of 
municipal  ownership.  The  failure  of  public  opinion 
to  protect  the  people  from  abuse  and  misuse  of  power 
by  the  State  and  the  Municipality  is  the  more  note- 
worthy, since  public  opinion  on  the  whole  had  ade- 
quately protected  the  public  against  abuse  of  power  on 
the  part  of  the  public  service  companies  which  were  dis- 
placed when  the  State  took  over  the  telegraphs,  and 
the  Municipalities  so  largely  took  over  the  so-called 
municipal  public  service  industries. 


INDEX 


Adventure,  The  spirit  of,  a  price- 
less quality  in  a  nation,  33 

Agreement  of  190 1,  The  Metio- 
politan  London,  269-86 ;  reached, 
274;  terms  of,  274-75;  rates  un- 
der, 275-76;  accepted  by  the 
Commons,  276-78;  did  not  cause 
appreciation  of  shares  of  Tele- 
phone   Company,    278 

Agreement  of  1905,  287-311;  en- 
tered into,  294;  conditions  of, 
294-98;  Select  Committee  ap- 
pointed on,  298;  warded  off  dan- 
ger of  arrest  of  investment  of 
capital,   310 

Agreement  reached  by  Government 
and  National  Telephone  Com- 
pany, 59,  1 1 5-16,  189,  199;  ac- 
cepted by  House  of  Commons, 
60;  Select  Committee  appointed 
on,    116;    opposition    to,    116 

Agreement  with  the  Marconi  com- 
panies,   340-41 

Alverstone,  Richard  Evered,  Lord, 
on  the  political  power  of  the 
Association  of  Municipal  Cor- 
porations,   91-92,    245-46,    352 

Amalgamations  of  1889-90,  30-38; 
United,  National,  and  Lancashire 
companies  amalgamated  into  Na- 
tional,   31;    completed,    34 

American  Bell  Telephone  Company, 
Exchanges   operated  by,    15 

American  call  box.  Use  of  the,  re- 
fused,  343 

American  Telephone  and  Telegraph 
Company,  Yearly  investment  of 
the,   293-94. 

Ardwall,  Andrew  Jameson,  Lord, 
see   Jameson,    Andrew 

Areas,  Mr.  Hanbury's  insinuations 
as  to  large,  184-86;  Arnold  Mor- 
ley   on,    186 

Areas  allowed  to  Telephone  com- 
panies restricted,  12;  limitations 
of,  removed,  18;  State  to  de- 
365 


niarcatc  local  teleplionc  areas,  51- 
S6 

Association  of  Chambers  of  Com- 
meice  on  inadequacy  of  trunk 
telephone  service,   69 

Association  of  Municipal  Corpora- 
tions demanded  for  local  authori- 
ties veto  power  over  telephone 
way-leaves,  s;  political  influence 
of  the,  5,  7,  91;  obtained  absolute 
veto  power  for  local  authorities, 
S7-89;  demands  that  Parliament 
fix  maximum  prices  and  dividend 
of  National  Telephone  Company, 
89,  184;  refused  by  Government, 
89-90;  Lord  Alverstone  on  the, 
91-92;  resolutions  of  Special 
Committee  of,  on  Act  of  1892, 
93-94;  completely  disregarded 
rights  of  public  for  five  years, 
97;  forced  the  policies  of  succes- 
sive Governments,  123;  demands 
of,  in  resolutions,  203-4;  cited, 
242;  political  power  of,  245-47, 
352;  money  spent  by,  in  opposing 
private  companies,  246,  286;  ap- 
proved Agreement  under  belief 
that  the  State  would  reduce  the 
tariffs,  311;  compelled  the  giving 
of  veto   power   on    way-leaves,   353 

Association  of  Telephone  Sub- 
scribers in   London,   101 

Australian  Colonies,  Burdens  on 
tax-payers   in,   73 

Automatic    signalling,    325-26 

Avebury,  John,  Lord,  on  the  in- 
jurious influence  of  the  Associa- 
tion of  Municipal  Corporations, 
247;    on   capitalists,   362-63 

Balfour  Ministry,  The,  in  1905 
repealed    the    legislation    ot    1899, 

237 

E.,  Statement  of,  showing 
I'.dinburgh's  dislike  of  National 
Telephone    Company,    173-74 


366 


INDEX 


Bell  and  Edison  patents,  Expiration 
of,  35 

Benn,  J.  W.,  moved  that  Argeement 
be  not  confirmed,  60;  estimate  of, 
accepted  by  London  County 
Council,  109-10;  motion,  in  op- 
position to  the  Agreement,  116; 
misleading  testimony  of,  129-30; 
misstatement  as  to  appreciation 
of  shares  by  the  Agreement,  277- 
78 

Bennett,  A.  R.,  approved  engineer- 
ing estimates  of  the  New  Tele- 
phone Company,  100;  submitted 
estimate  in  1898,  108;  before 
Select  Committee  of  1898,  217- 
18;  estimates  proved  wrong,  218; 
statement  of  ascertained  cost  of 
installing  Glasgow  telephone  sys- 
tem, 313;  on  common  battery 
speaking,    325 

Bill  authorizing  $5,000,000  for  pur- 
chase of  National  Telephone 
Company's   trunk    lines,    50 

Bill  to  authorize  local  authorities 
to  raise  or  apply  money  for  tele- 
phones, 239-40 

Bills  asking  for  way-leaves  not 
allowed  by  Government,  41,  82- 
83,  20s 

Binnie,  Sir  Alexander  R.,  prepared 
engineering  estimates  in  1895  for 
London  County  Council  on  $50 
a  year  service,  105,  106-7,  H9; 
estimate  in  1898,  108;  had  no 
practical  experience,  107;  before 
Select  Committee  of  1898,  217; 
estimates  of   proved   wrong,   217 

Birmingham  telephone  area  broken 
up.    53-54 

Blue  books.  Parliament  and  the 
public  too  busy  to  read,  193 

Boscawen,  G.,  seconds  motion  of 
J.   Caldwell,   on  licenses,    178 

Boy  messenger  service  hampered, 
343 

Bribing    bills,    Annual    government, 

Brighton,  Corporation  of,  has  never 
granted  way-leaves  to  National 
Telephone  Company,  6,  95;  tele- 
phone venture  of,  a  failure,  7; 
put  municipal  wires  underground, 
95;  trouble  in,  136;  refused  way- 
leaves,  255;  sells  its  plant,  329- 
30;  tariffs  in  Brighton  area,  329- 
3on 


British     public.     Poor     prospect     of 

adequate    service     for,    310,    311; 

astounding    blindness    of,    353-54 
Buncrana,   Guarantee    demanded   for 

exchange   at,   263 
Bureaucracy,    A    gigantic,     building 

up,    247 
Business      undertakings.      Commons 

cautioned   against,   22 
Buxton,    Sydney,  on  new  tariffs   for 

Glasgow,    327-28 

Cabinet,  Decision  of  the,  against 
undertaking  the  whole  telephone 
business,    49 

Caldwell,  James,  Motion  of,  re- 
garding refusal  of  Post  Office  to 
grant  licenses  to  local  authori- 
ties,   178;    withdrew    motion,    191 

Calls,  Rates  for,  in  London  area, 
276 

Cameron,  Dr.  Charles,  moves  the 
nationalization  of  the  telephone, 
47;  leader  in  cutting  price  for 
telegrams,    89 

Capital  invested  in  a  new  industry, 
Proper   return   on,    38 

Capital    investment    required,    308-9 

Capitalists  the  brains  of  industry. 
362-63 

Cardiff   Exchange,  26 

Cash   investment.   Earnings  upon,  35 

Cavendish,  Lord  Frederick,  on  the 
pressure  from  telegraph  clerks  as 
a   warning  to   the   Government,   24 

Central    battery    speaking,    325-26 

Chamberlain,  Joseph  Austen,  de- 
fends London  Agreement  of 
1901,  277-78;  on  wireless  teleg- 
raphy,  338-39 

Chambers  of  Commerce,  The  great, 
opopsed    to    municipalization,    202 

Charges,  reduced  to  diminish  temp- 
tation to  outsiders  to  go  into  the 
business,  35;  for  long  distance 
telephone  messages,  59;  Parlia- 
ment asked  to  fix  maximum,  89- 
90,  93,  94,  189,  204;  maximum, 
a  question  between  Government 
of  the  day  and  Parliament,  205, 
206 

Charges  for  London  telephone  area, 
i27n;  to  be  prescribed  by  Post- 
master General,  252,  254;  joint 
tariff    of,    established,    275-76 

Charges  of  violation  or  neglect  of 
duty   against   Telephone   Company 


INDEX 


367 


unsupported  by  conclusive  evi- 
dence,  260 

Chisholm,  Bailie  S.,  on  reasons  for 
action  of  Glasgow  Corporation, 
158-59;  contradictory  statements 
by,    164,    170,    170-71 

Cities,  Number  of,  granting  under- 
ground  way-leaves,  96-97 

Civil  servants.  Political  and  finan- 
cial danger  from  increase  of, 
242-43 

Civil  service  a  source  of  danger, 
47-48,   61 

Clare,  H.  E.,  on  need  of  trunk 
line  facilities,  66-67;  on  absolute 
veto  given  local  authorities,  87- 
88;  authorized  to  represent  Com- 
mittee of  Association  of  Munici- 
palities, 94;  on  compulsory  sale 
at  structural  value,  121-22;  sig- 
nificance of  testimony  of,  122- 
23 ;  on  contracts  made  by  Na- 
tional Telephone  Company,  204; 
on  local  jealousies  in  Liverpool, 
265 

Colquhoun,  James,  on  eiTect  of  pro- 
tective clauses  in  Glasgow  electric 
railway  Act,  140-41;  on  reasons 
for  action  of  Glasgow  Corpora- 
tion,   160-61 

Commissioners  of  Sewers  of  Lon- 
don refuse  undergrouxid  way- 
leaves  to  Postmaster  General, 
133-34;  defeated  in  the  courts, 
134-35 

Competition,  Allegation  of  unfair, 
26-28;  increased,  from  telephone 
unwelcome,  42 ;  Post  Office  re- 
serves right  to  authorize,  56; 
bad  faith  of  Government  regard- 
ing, 62;  favored  by  Mr.  Han- 
bury,  183;  opposed  by  Mr. 
Morley,  198-99;  and  by  J.  C. 
Lamb,  199-200;  recommended  by 
Select  Committee,  215-16;  advo- 
cated by  A.  Binnie  and  A.  R. 
Bennett,  217-18;  rectitude  of  in- 
augurating, 223-24;  potential,  to 
be  established,  227 ;  all-round, 
authorized,  239-40;  unfair  pro- 
vided for,  255,  258;  municipal, 
abandoned  as  an  utter  failure, 
260-61;  unfair,  272;  unfair  re- 
commended by  Select  Committee, 
306;  rejected  by  Government, 
3o5 

Competition,     Municipal,     with     Na- 


tional Telephone  Company,  a 
failure,    7 

Competition  and  the  possibility  of, 
Wide  difference  between,  26,  119- 
20 

Concessions,  Minor,  to  National 
Telephone    Company,    57-58 

Conditions  imposed  in  way-leave 
contracts,     95-97 

Conservative  Party,  Bad  faith  of 
Government  under,  regarding 
competition,   62 

Conservative  Salisbury  Ministry, 
The,  accepted  Report  of  Select 
Committee  of  1898,  237;  the 
Balfour  Ministry  in  1905  re- 
pealed    the     legislation     of     1899, 

Consolidated  Fund,  $10,000,000  ap- 
propriated from,  for  telephone 
improvements,    240 

Consolidation,  Motives  for,  31-32; 
greater  efficiency,  31;  a  united 
company  could  obtain  better 
terms  from  the  Government,  32; 
fusion  effected  on  basis  of  mar- 
ket   values,   32 

Contracts  with  subscribers  for 
private    way-leaves,    77-78,    79n 

Control,  Break  of  continuity  of, 
between  local  and  long-distance 
lines,    70-71 

Cost  per  subscriber's  line,  179-80, 
i8r 

Cost  price  not  a  proper  basis  for 
sale,    121 

Cost  to  make  trunk  service  ade- 
quate, 68 

Davies,  Dixon  H.,  on  money  spent 
by  Municipal  Corporations  in 
opposing  private  companies,  246- 
47 

De  Forest  Wireless  Telegraph  Syn- 
dicate   refused   a   license,   341 

Delays,  Serious,  in  trunk  service, 
68 

Dimsdale,  Sir  Joseph,  moves  for 
suspension     of     Agreement,     276- 

n 

Disappointments  at  result  of  state 
ownership  of  the  telegraphs,  24- 
25;  at  failure  of  promises  of 
agitators,  276 

Disillusionment  of  leaders  of  po- 
litical   parties,    25 


368 


INDEX 


Disraeli  Ministry  refuses  to  take  up 
telephone   business,   25 

District  service  companies  ham- 
pered,  343 

Dividends  declared  by  telephone 
companies,  35;  Parliament  asked 
to  fix  maximum,  89-90,  93,  94; 
paid  by  National  Telephone  Co., 
105;   accusations   regarding,    113 

Dockwra,  William,  and  his  penny 
post,   344 

Dundee,  Experience  of  first  Tele- 
phone  Company  of,    154 

Earnings   upon   cash   investment,    35 

Earth-return  circuit  the  main  cause 
of   inefficiency,    155-56 

Eccles,  Opposition  of,  to  coopera- 
tion   with    Manchester,    264 

Economist,  The,  on  N.  M.  Roths- 
child &  Sons  financing  the  New 
Telephone   Co.,    loin 

Edinburgh  refused  way-leaves  and 
put  in  municipal  twin-wire  plant, 
94-95;  misled  by  London  Com- 
mon Council,  136;  obstructs  Post- 
master General,  173;  hostility  to 
National    Telephone    Co.,    173-74 

Electric  Light  station,  public  cen- 
tral, Exclrsion  of  the,  from  1882 
to   1888,   98 

Electric  Lighting  Act  of  1888,  Re- 
fusal of  several  Governments  to 
amend  the,   97-98 

Electric    lighting    industry,    123 

Electric  power  supply   industry,    123 

Electric  street  railway  industry, 
Paralysis   of,   98 

Electrical  Review  on  the  Glasgow 
purchase,    322-23 

Electrician  on  wireless  telegraphy, 
340 

Employees,  Huge  army  of  over- 
paid,  71 

Engineering  estimates  of  New  Tele- 
phone Company  approved,  100; 
shown  to  be  unreliable  as  to 
outlay  and  income,  103;  of  Lon- 
don County  Council,  105-7;  J-  C. 
Lamb  on,  107-8;  compared  with 
cost  to  Post  Office,  109;  con- 
tradicted by  experience  of  the 
Post  Office,  113;  of  W.  H. 
Preece,   206 

Engineering  on  the  Glasgow  pur- 
chase",  323 

Equity,  Question  of,  in  parliament- 


ary repudiation,  236,  257-58;  in 
Government's  demand  for  inter- 
commvmication,    286 

Estimates  and  outcome,  Divergence 
between,    109,    113 

Exchanges,  Multiplication  of,  for 
lack  of  way-leaves,  78-79;  average 
distance  from  subscribers'  premi- 
ses, 106;  small,  operated  by  Post 
Office,    i8on 

Experience  and  not  estimates  should 
be    followed,    108,    120 

Extensions,  unprofitable.  Difficult 
for  Government  to  resist  calls 
for,  48,  65 

Fallacy,  An  absolute,  circulated  by 
the    Common   Council   of  London, 

135.    137 

Fawcett,  Henry,  Postmaster  Gen- 
eral, Announcement  of,  in  Com- 
mons, regarding  telephone  li- 
censes, 11-12;  usurpation  of 
power  in  ruling  of,  14-15;  an- 
nounced change  of  policy,  17-18; 
on  request  of  United  Telephone 
Company,    17 

Fergusson,  Sir  James,  on  the  pur- 
chase of  the  trunk  lines,  45-46; 
opposed  nationalization  of  tele- 
phone, 47,  65;  the  civil  service 
a  source  of  danger,  47-48,  pres- 
sure on,  to  make  Wolverhampton 
a  separate  area,  53-54;  on  giving 
telephonic  facilities,  67;  opposes 
giving  statutory  powers  to  New 
Telephone  Company,  85-86;  fa- 
cilitated the  amalgamation  of  the 
two  companies,  102;  on  maxi- 
mum charges,  'i89n;  on  service 
to  small  places,  212,  244;  on  the 
harmony  between  the  Post  Office 
and  the  National  Telephone 
Company,  340-41;  reply  to  Mr. 
Hanbury,  250-51;  on  unfair  com- 
petition, 272 

Financiers,  Faith  of,  in  the  rights 
of  private  property,  when  in  con- 
flict with  public  interests,  shaken, 
361-62 

Flannery,  Fortescue,  waiting  for 
telephone   over   three   years,   79-80 

Forbes,  J.  S.,  on  cost  of  private 
way-leaves  in  London,  78;  on 
multiplicity  of  exchanges  in 
London,  79;  on  engineering  esti- 
mates   of    New    Telephone    Com- 


INDEX 


3f)9 


pany,  103;  on  why  London  was 
badly  served,  137-38;  admits  in- 
efficiency, 143;  on  necessity  for 
way-leaves  in  Glasgow,  144; 
pledges  the  best  service,  144;  on 
cost  of  the  Glasgow  inquiry,  171; 
on  cost  of  subscribers'  wires, 
181;  pledges  of,  for  the  Com- 
pany, 187-88;  replies  to  Han- 
bury's  queries,  i88n;  vigorous 
speech  for  Company,  191;  on 
reasons  for  relatively  high  tariffs, 
196-97;  on  sale  of  trunk  lines, 
231;  reliance  on  Mr.  Goschen's 
speech,  232-33;  on  wages,  249- 
50;  on  efforts  to  conciliate  the 
Government,  273-74;  on  new 
business  of  the  Company  for 
next   five   years,    309 

Fowler,  Sir  H.  H.,  on  difficulty  of 
raising  capital  under  expiring 
franchises,   291-92 

France,  Log-rolling  and  bribing  in 
state   railway   system   in,    72 

Franchises,  Short-lived,  with  com- 
pulsory sale,  check  investment  of 
capital,  122-23;  vacillating  policies 
regarding,  123;  Mr.  Forbes  on 
investment   under,    197 

Gaine,  W.  E.  L.,  Argument  of,  for 
large  local  areas,  52-53 ;  on  Gov- 
ernment's promise  of  way-leaves, 
57;  on  rate  of  subscription  with 
access  to  a  trunk  line,  64;  on 
need  of  more  trunk  wires,  67;  on 
mileage  of  wires  in  place  on 
sufferance,  76-77;  on  attitude  of 
London  local  authorities,  79;  on 
the  ethics  of  Sir  A.  J.  Russell, 
95 ;  transferred  operators  to  Post 
Office  exchange  in  Glasgow,  143- 
44;  on  cost  per  line,  179;  mis- 
quoted by  Mr.  Hanbury,  180-81; 
on  mileage  of  wire  in  place  by 
sufferance,  196;  on  measured 
service,  198;  Mr.  Morley  on 
competition,  198-99;  on  contracts 
made  by  National  Telephone 
Company,  204;  on  jealousies  of 
local  authorities,  265;  on  difficulty 
of  raising  capital,  293-94;  on  the 
hard  bargain  in  Agreement  of 
1905,  299;  on  par  value  of  shares, 
301;  on  modern  character  of  the 
plant,  303 ;  on  rental  for  under- 
ground    wires,     309-10;     on     in- 


efficiency of  overhead  metallic 
circuit  system,  316;  on  policy  of 
Telephone    Co.,    320-21 

Gavcy,  John,  on  locating  responsi- 
bility for  delays,  71;  on  operat- 
ing expenses,  1 11-12;  on  over- 
loading and  cost  of  calls,  207-8; 
on  losses  due  to  progress  of  in- 
vention, 284-85;  on  duplication 
of  provincial  plant,  290;  on  auto- 
matic   signalling,    325 

General  International  Wireless 
Company    refused    a    license,    341 

Gladstone  Ministry  refuses  to  take 
up    the    telephone    business,    25 

Glasgow,  No  space  for  private 
wires  from  London  to,  70;  serv- 
ice in,  adequate,  152-53;  charges 
in,  not  unreasonable,  153-54; 
continued  inefficiency  of,  due  to 
refusal  of  way-leaves,  157; 
tariffs  established,  317;  tariffs  of 
National  Telephone  Company  in, 
317-18;  subscribers  to  Municipal 
Telephone  Exchange,  318;  to 
National  Telephone  Company, 
319;  beaten  to  a  stand-still,  319; 
advantages  for  Glasgow,  319-20, 
handicap  on  Telephone  Company, 
320;  plant  purchased  by  Post- 
master General,  321-23;  plant  be- 
come obsolete,  323-24,  326;  pro- 
portion of  expenditure  to  revenue 
in,  326n;  to  be  reequipped,  327; 
new  tariffs,  327-28;  rejects  pur- 
chase offer  of  Telephone  Co., 
328;  the  statesmen  of,  354;  treat- 
ment of  James  Watt   in,   355 

Glasgow,  sec  also,  Jameson,  An- 
drew,   Commissioner,    report 

Glasgow,  Corporation  of,  has  never 
granted  way-leaves  to  National 
Telephone  Company,  6;  venture 
of,  with  telephone  business  a 
failure,  7;  reason  for  refusing 
way-leaves,  94;  put  municipal 
wires  underground,  95;  misled 
by  London  County  Council,  136; 
chapter  on  the  Glasgow  episode, 
139-76;  obtained  a  Private  Act 
authorizing  electric  street  rail- 
ways, 140;  charged  that  National 
Telephone  Company  deterred  in- 
stallation, 140-41;  acts  on  an 
anonymous  estimate,  142-43;  ap- 
plied for  telephone  license  and 
denied     underground     way-leaves, 


370 


INDEX 


Glasgow,  Corporation  (contimied) 
143;  responsible  for  inefficient 
service,  157,  164-65;  refusal  of 
way-leaves  by,  unreasonable,  self- 
condemned  and  inconsistent,  157- 
65,  182;  inexpedient  to  have  two 
systems,  166-67;  Post  Office 
might  establish  underground 
metallic  circuit,  168;  Commis- 
sioner recommends  a  license  for, 
169;  obstructs  Postmaster  Gen- 
eral, 172;  appeal  to  the  Railway 
and  Canal  Commissioners  decided 
against,  172;  the  quarrel  delayed 
completion  of  trunk  line  circuits, 
173;  recent  electric  light  and 
street  railway  policies,  174-75  5 
overcrowded  population  of,  174- 
75;  planned  to  destroy  property 
of  National  Telephone  Company, 
255;  disregard  of  public  con- 
venience by,  286;  beaten  to  a 
standstill,  288;  demanded  breach 
of  a  Parliamentary  contract,  304, 
311;  began  telephone  plant  in 
1900,  314;  actual  cost,  314;  laid 
its  wires  underground  and  re- 
fused National  Telephone  Com- 
pany  permission,   314 

Glasgow   inquiry.    Cost   of   the,    171 

Glasgow  municipal  telephone  ex- 
change.  Experience    of   the,    114 

Good-will  of  the  great  business.  No 
consideration    given     for    the,    299 

Goschen,  G.  J.,  opposed  nationali- 
zation of  telephone,  47;  Govern- 
ment should  not  extend  its 
functions,  49;  on  Government's 
policy  toward  competition,  56,  62; 
on  purchase  of  the  trunk  lines, 
224-27;    statements    by,    233-36 

Government  unwilling  to  engage  in 
further  industrial  ventures,  3; 
granted  restricted  licenses  to  tele- 
phone companies,  4;  placed  in- 
terests of  national  treasury  above 
rights  of  the  public  as  users  of 
telephone,  4;  granted  way-leaves 
to  National  Telephone  Company, 
5;  contracted  to  buy  its  property 
at  end  of  1911,  7;  declines  to 
buy  telephone  patents,  9,  28;  un- 
successful effort  of,  to  protect 
state  telegraphs  from  telephone, 
9;  protects  by  restrictions  on  li- 
censes, 12-13,  28;  offer  of,  to 
build    trunk    lines,     13;     relaxed 


restrictive  measures,  16-18,  28, 
39;  reserved  right  to  compete 
with  United  Telephone  Company, 
18;  to  have  option  of  purchase  of 
plants,  18;  opposed  to  rate-aided 
competition,  19-21;  must  seek 
protection  in  local  guarantees,  21; 
warned  against  business  under- 
takings, 24;  taught  its  weakness 
in  protecting  treasury  against 
illegitimate  demands,  34;  did  not 
dare  dismiss  the  National  Tele- 
phone Company's  Bill  of  1892, 
41-42;  buys  trunk  lines  of  Na- 
tional Telephone  Company  at 
cost  of  construction,  43,  61,  224- 
27;  reasons  for  purchase,  45-46; 
opposed  to  nationalization  of  tele- 
phone service,  47,  61;  alarmed  at 
competition  of  telephone  with 
telegraph,  47;  policy  toward  au- 
thorizing competition,  56,  62; 
promised  way-leaves,  57,  86-87; 
should  have  reformed  administra- 
tion of  telegraphs,  or  purchased 
entire  telephone  system,  61;  bad 
faith  of  Conservatives  regarding 
competition,  62;  fear  of  "log- 
rolling," 64-65;  compelled  Post 
Office  to  refuse  doubtful  ex- 
tensions unless  guaranteed,  65; 
unable  to  husband  its  resources, 
71;  how  money  is  wasted  by,  71- 
72;  refused  to  allow  Bills  for 
way-leaves,  82-83,  85-86;  fears 
the  telephone,  85-86;  yields  to 
the  Association  of  Municipal  Cor- 
porations, 57,  87;  gave  absolute 
veto  power  to  local  authorities, 
87-88;  refused  rights  of  way 
from  1880  to  1892,  97,  205;  co- 
operates with  National  Telephone 
Company,  189-90;  agreed  to  a 
Select  Committee  on  municipal 
telephones,  191;  persistently  re- 
fused way-leave  powers,  205 ; 
reasons,  206;  Mr.  Goschen's 
policy  in  buying  trunk  lines,  224- 
27;  issued  Treasury  Minute,  227- 
28;  persistently  refused  conces- 
sions, 236;  not  free  to  inaugurate 
general  competition,  236;  opposed 
to  nationalization,  242;  refused 
Telephone  Co.  way-leaves  on 
railway  property,  270-71;  sup- 
ported County  Council's  policy, 
272;    exacted    free    intercommuni- 


INDEX 


371 


cation  in  1901,  280;  disregard  of 
public  convenience  and  the  de- 
mands of  rectitude  by,  285-86; 
broaches  purchase  of  provincial 
plant,  287;  agreement  to  pur- 
chase, 294,  311;  acquires  sub- 
marine cables,  337;  reasons  for 
restricting  wireless  telegraphy, 
341-42;  desire  of  to  acquire  the 
profits  of  the  Telephone  Com- 
pany, 347;  attains  the  object  of 
its   long   desire,    359 

Governments,  Popular,  cannot  hus- 
band   their    resources,    71-72 

Great  Britain,  Money  wasting  ex- 
perience of,   typical,  72-73 

Great  Britain,  Story  of  telephone 
policy  of,  resembles  story  of 
municipal    ownership    in,    348 

Guarantee  of  specific  revenue  re- 
quired for  extensions  of  doubtful 
prospect,   65 

Guernsey,  States  of,  in  dispute  with 
Post  Office,  201-2 

Hanbury,  R.  W.,  Political  ambition 
of,  3;  parliamentary  leader  in 
favor  of  municipal  telephone  ex- 
changes, 6;  member  of  Cabinet 
in  Salisbury  Ministry,  6;  at- 
tributed failure  of  Post  Office 
Telephone  exchanges  to  preferen- 
tial rates  given  by  National  Tele- 
phone Company,  26-27;  admitted 
the  Company  never  gave  any, 
28 ;  without  sympathy  of  Post 
Office  officials  in  his  abuse  of 
National  Telephone  Company,  60- 
61;  attacks  the  National  Tele- 
phone Company,  177-93;  charges 
'"watered"  capital,  179;  misquotes 
testimony  of  Mr.  Gaine,  180-S1; 
charges  inefficient  service,  181; 
his  own  answer,  182-83;  favors 
competition  and  sympathizes  with 
refusal  of  way-leaves,  183;  in- 
sinuations as  to  large  areas,  184- 
86;  sug  sts  bad  faith,  187;  an 
unregul;  :d  monopoly,  188-89; 
charges  personal  discrimination, 
190;  on  maximum  charges,  205; 
wants  a  general  service,  212-13; 
treats  National'  Telephone  Com- 
pany as  criminal  and  an  enemy 
of  the  public,  240;  speech,  on 
second  reading  of  Telegraph  Bill, 
against   Telephone    Company,   241- 


43;  unfounded  and  offensive  in- 
dictment of  National  Telephone 
Company,  243;  inaccurate  state- 
ment of  statistics,  243-44;  false 
charge  that  National  Telcplionc 
Company  picked  out  the  best  spots, 
244;  alleged  undue  political  in- 
fluence, 245;  on  statutory  obliga- 
tions, contradicted  at  the  moment, 
248;  contradicts  himself,  248; 
ignores  contracts  made  by  the 
Company,  249;  on  wages  paid, 
248-49;  no  adequate  reply  made 
to,  250;  on  unfairness  in  buying 
plants,  254;  made  President  of 
Board  of  Agriculture,  260;  on 
necessity  for  intercommunication, 
272-73;  false  promise  of  rate 
for  exclusive  line,  276;  on  in- 
tercommunication, 280-81;  som- 
ersault of,  in  1902,  281-82;  on 
cutting  of  rates  by  Post  Office, 
282 ;  mischievous  effects  of  Han- 
bury's    work    summarized,    358-59 

Harris,  George  Robert  Canning, 
Lord,  on  insufficiency  of  trunk 
service,  68;  on  ignorance  of  the 
other   side   of  the   question,    192-93 

Harrison,  John,  on  reason  for  ask- 
ing veto  power,  88,  183-84;  au- 
thorized to  represent  Committee 
of  Association  of  Municipalities, 
94;    testimony   of,    122 

Haward,  PI.  E.,  on  price  to  be  paid 
for  debenture  stock  and  prefer- 
ence   shares,    301-3 

Horse  street  railway  industry, 
Paralysis  of  the,  98 

House-top  way-leaves  only  obtained 
in  some  large  cities,  57;  difficult 
way  of  reaching  subscribers,  126, 
129;    an    inefficient   system,    141 

House-top  wires.  Capital  invested 
in,   practically   thrown   away,   285 

Hull,  Municipal  exchange  of,  obso- 
lete, 330;  declines  to  sell,  331; 
tariffs    in,   33 m 

Hull,  Municipal  telephone  venture 
of,  a  failure,  7 

Hunter,  Sir  Robert,  on  maximum 
price  and  maximum  dividend,  go, 
i89n;  testimony  before  Select 
Committee  of  1898,  195-96;  on 
subscribers  supplying  supports 
for  wires,  209;  on  securing  way- 
leaves  for  provincial  plant,  290- 
91;  on  Agreement  of   1905,   298 


372' 


INDEX 


Industrial  pioneers,  Losses  carried 
by,  284,  349;  violation  of  rights 
of,  362 

Industrial  progress,  British  Govern- 
ment and  municipalities  incapable 
of  contributing  to,   363 

Industrial  ventures,  Government 
unwilling  to  engage  in  further, 
3;  failure  of  governments  in 
financing  great,    73 

Industries,  ready-made.  Public  may 
take,  349-50,  363;  and  must  then 
protect,    350-51 

Industry,  a  new,  Proper  return  on 
capital    invested    in    a,    37 

Industry  and  capital.  Relations  of, 
362-63 

Inglis,  Lord,  on  ownership  of 
streets,    163 

Inquiry,    Scope    of    the,    4-7 

Instruments,  Security  for  care  of, 
required,   209 

Intercommunication  of  exchanges. 
Efforts    for,    193 

Intercommunication,  Provisions  for 
restricted,  252-53;  and  unre- 
stricted, 253;  charges  for,  253, 
258;  bargained  for,  with  eight 
years'  extension  of  license,  269; 
not  available  in  Metropolitan 
London,  270;  granted  by  Tele- 
phone Co.  in  London  area,  274; 
free,  a  one-sided  bargain,  279-81; 
Government  refused  to  grant 
free,  in  1905,  281;  granted  by 
Telephone  Company  in  Agree- 
ment  of    1905,   297 

Invention,  Losses  due  to  progress 
of,   284-85 

Investment  under  expiring  fran- 
chises, 291-93;  the  largest  an- 
nual,   309 

Investments  discouraged  under 
short-lived    franchises,    197 

Isle  of  Thanet  Telephone  Company, 
License  of,  bought  by  National 
Telephone  Company  for  Post 
Office,    55 

Italy,  Failure  of  state  railway  ex- 
periment   in,    72 

Jameson,  Andrew,  appointed  Com- 
missioner to  inquire  into  the 
Telephone  Exchange  Service  in 
Glasgow,  148;  reports,  service 
not  efficient,  causes  and  com- 
plaints,    149-52;     service     is     ade- 


quate, 152-53;  charges  not  un- 
reasonable, 153-55,  182;  earth- 
return  circuit  main  cause  of  in- 
efficiency, 155-57;  refusal  of  way- 
leaves  unreasonable,  157-61;  Cor- 
poration's evidence  self-con- 
demned, 161,  184;  sentimental 
and  fanciful  objections,  162; 
nature  of  public's  property  in  the 
streets,  162-63,  175  5  inconsistency 
of  objections,  164;  Corporation 
mainly  responsible  for  ineffi- 
ciency, 164-65;  disbelieves  in  com- 
petition, 165-68;  the  reasonable 
solution,  168;  the  actual  solution, 
168-69;  implication  from  his 
comments  on  streets,  175;  Han- 
bury's  misrepresentation  of,  181- 
82;  Report  of,  and  evidence  taken 
before,  referred  to  Select  Com- 
mittee   of    1898,    19s 

Joicey,  Sir  James,  on  the  giving  of 
way-leaves,    251 

Jones,  Stewart,  on  inadequacy  of 
trunk    lines   at    Newcastle,    70 

Kelvin,  William  Thomson,  Lord, 
on  the  ugly  side  of  human  na- 
ture,   193 

Kennedy,  A.  B.  W.,  approved  en- 
gineering estimates  of  the  New 
Telephone    Co.,    100 

Knocker,  Sir  Wollaston,  approved 
Agreement  of  1905  for  Associa- 
tion of  Municipal  Corporations, 
300 

Lamb,  J.  C,  on  competition  and 
tlie  possibility  of,  26,  120,  199; 
on  unfair  competition,  27;  reply 
of,  for  Post  Office,  refusing  to 
make  large  local  areas,  53-54; 
on  demand  of  local  exchanges 
for  trunk  service,  64;  admitted 
lack  of  trunk  lines,  66;  on 
difficulty  of  getting  money  from 
Treasury  for  trunk  wires,  67;  on 
the  amalgamation  of  the  two 
companies,  102;  on  the  engineer- 
ing estimates  of  London  County 
Council,  107-8;  on  the  purchase 
by  the  Government,  11 8-19;  on 
municipal  competition,  119-21, 
200-2;  on  cost  per  subscriber's 
line,  180;  opposed  to  competition, 
199;  on  extending  service  to 
small    places,    211-12,   244;    on    de- 


INDEX 


373 


marcation  of  areas,  222;  drafted 
Treasury  Minute,  228;  on  Na- 
tional Telephone  Company,  228- 
29;  on  local  jealousies,  265-66; 
on    granting   more    licenses,    338 

Lancashire  and  Cheshire  Company, 
Offer  of,  to  rent  trunk  lines,  for 
free  long-distance  service  refused, 
13,  29;  field  of  operation  of,  31; 
shares  of  taken   at    131.25,   32 

Lancashire  and  Yorkshire,  Develop- 
ment of  telephone  system  in, 
checked    telegraph    revenue,    46 

Legislation  can  not  take  the  place 
of  education,   352 

License,  The  standard,  binds  Post 
Office  to  buy  at  expiration,  255- 
S6 

Licenses,  Restricted,  granted  to 
telephone  companies,  4,  10,  12-13; 
merely  waived  monopoly  rights 
and  conferred  no  powers,  11-12; 
all  to  expire  in  31  years,  13; 
regulations  for,  prohibitory,  16; 
all  outstanding  to  be  replaced  by 
new,  18;  if  plants  bought  by 
Government  on  expiration  of, 
price  to  be  fixed  by  arbitration, 
18;  Post  Office  system  of,  a  re- 
striction of  telephone  service,  47; 
power  conferred  by,  55 ;  nature 
of  telephone,  75;  demand  on 
Post  Office  to  change  its  policy 
of  refusing,  to  local  authorities, 
178;  James  Caldwell's  motion  re- 
garding, 178;  Government  state- 
ment regarding,  227-28;  taken 
out  under  Telegraph  Act,  261, 
288-89;  granting  of  more,  open 
to  objection,  338;  for  wireless 
telegraphy  restricted,  340;  re- 
fused,  341 

Limerick,  Guarantee  required  for 
trunk    line   from,   to    Nenagh,    263 

Liverpool,  65  per  cent  of  sub- 
scribers in,  used  trunk  lines 
daily,  64;  more  trunk  wires 
wanted  between  London  and,  67; 
no  space  for,  69-70;  local  jealous- 
ies   in,    263 

Local    and    parochial   jealousies,    185 

Local  authorities  demanded  veto 
power  in  order  to  charge  for 
use  of  streets  and  to  fix.  tariffs, 
5-6;  veto  power  given  to,  and 
how  used,  6;  must  be  consulted 
for   way-leaves,    11-12;    oppose  ex- 


tension, 86;  given  an  absolute 
veto  on  way-leaves,  87;  control 
charges,  89;  adjoining,  loath  to 
act  together,  52,  185;  had  no 
right  to  give  permission  to  put 
wires  underground,  75;  could 
give  power  to  place  posts  along 
public  ways,  75;  in  London  re- 
fuse way-leaves,  79;  all  but 
complete  refusal  of,  to  accept 
Telegraphs  Act  of  1892,  93-94; 
conditions  imposed  by,  granting 
underground  way-leaves,  9S-9^; 
practically  no  demand  from,  for 
telephone  licenses,  177;  list  of 
places  asking  for,  to  May,  1898, 
i77n;  demand  that  Post  Office 
change  its  policy  of  refusing 
licenses  to,  178;  telephone  serv- 
ice by,  a  failure,  213;  given  right 
to  raise  money  for  establishing 
exchanges,  251;  thirteen  took  out 
licenses,  261;  conservatism  and 
jealousies  of,  causes  of  failure 
of  Telegraph  Act,  263;  inability 
of  adjoining,  to  cooperate,  264; 
experience  of,  with  tramways  and 
electric  lighting,  266;  took  no 
advantage  of  Telegraph  Act,  288- 
89 

Local  exchanges,  of  three  leading 
companies  connected  by  trunk 
lines,  31;  difficult  for  outside 
companies   to   organize,    100 

Local  telephone  areas.  State  to 
demarcate,  51-56,  61-62;  prin- 
ciples of  demarcation,  51-52; 
National  Telephone  Company  de- 
sired large,  52;  Mr.  Gaines* 
arguments  for,  52-53;  J.  C. 
Lamb's    reply,    53-54;    of   London, 

185 

Log-rolling,  Precautionary  meas- 
ures against,  21-23;  fear  of,  63, 
64-65;  practice  of,  72;  in  France, 
Italy   and   Australia,    72-73 

London,  City  of,  episode,  133-38; 
demand  of,  to  prescribe  charges, 
133;  refused  way-leaves  to  Post- 
master General,  133-34;  courts 
decide  against,  134-35;  never 
gave  way-leaves,  138;  disregard 
of  public   convenience   by,   286 

London,  Corporation  of  the  City 
of,  has  never  granted  way-leaves 
to  the  National  Telephone  Com- 
pany,   6;     did    not    accept    Marl- 


374 


INDEX 


London,  Corporation  of  (continued) 
borough's  retraction,  104;  as- 
sertions  of,    contradicted,    113 

London,  Metropolitan,  Agreement, 
1901,  269-86;  motion  against, 
276-77;    lost,    278 

London,  Metropolitan,  Telephone 
service  to,  at  $50  a  year,  3,  4; 
Edison  Company  announced  it 
would  establish  telephone  ex- 
changes in,  10;  areas  for  tele- 
phones in,  restricted,  12;  tele- 
phone subscribers  in,  15;  no 
space  for  new  wires  to  other 
cities  from,  69-70;  cost  of  private 
way-leaves  in,  78;  i8  central  ex- 
changes in,  78;  unsatisfactory 
service  in  because  local  authori- 
ties refuse  way-leaves,  79;  ob- 
stacles to  twin-wire  system  in, 
80-81;  underground  way-leaves 
probable,  81;  telephone  area,  and 
rates  in,  iio-ii,  185;  J.  S. 
Forbes  on  why  London  was 
badly  served,  137-38;  four  ex- 
changes in,  where  one  would 
suffice,  196;  Post  Office  to  estab- 
lish a  telephone  plant  in,  240; 
popular  assumption  of  cost  in, 
25s;  competition  in,  abandoned, 
260;  Telegraph  Act  abandoned 
for,  in  two  years,  281 

London  and  Paris,  Metallic  circuit 
system  between,  superior  to  sin- 
gle wire  system  in  London,  41; 
success   of,    47 

London  County  Council  has  never 
granted  way-leaves  to  National 
Telephone  Company,  6;  did  not 
accept  Marlborough's  retraction, 
104;  submitted  engineering  esti- 
mates for  a  $50  a  year  service, 
105;  statements  of,  contradicted 
by  experience  of  Post  Office,  113; 
chapter  on  episode,  125-32;  re- 
fused underground  way-leaves, 
125;  adds  new  conditions  to 
terms  of  agreement,  126;  re- 
jected offer  of  a  measured  serv- 
ice, 128;  new  demands,  and 
negotiations  broken  off,  128-29; 
intervention  of  Post  Office  for, 
130;  never  withdrew  veto  on 
underground  wires,  132,  138; 
stupidly  obstructive,  135-36;  pro- 
posed to  ask  from  each  sub- 
scriber    one     support     for     wires. 


208-9;  "disturbed"  at  purchase 
from  National  Telephone  Com- 
pany,   301 

Long-distance  service  of  National 
Telephone  Company,  Compulsory 
sale'  of,  39-62;  demand  for  the, 
43-44;  motive  of  purchase  of,  45- 
46;  acquired  by  the  State,  49- 
51;  scale  of  charges,  59;  Post 
Office  fails  to  provide  adequate, 
63-73 ;  importance  of  an  ade- 
quate, 64 

Losses  carried  by  industrial  pion- 
eers, 284;  due  to  progress  of  in- 
vention, 284-85;  due  to  play  of 
national  and  municipal  politics, 
285 

Lough,  T.,  seconded  motion  against 
Agreement  of  1901,  zyy;  moved 
rejection  of  Agreement  of  190s  307 

Macfarlane,  John,  on  reasons  for 
action  of  Glasgow  Corporation, 
159-60 

Manchester,  Public  pay  stations 
not  allowed  in,  12-13;  local  com- 
pany wished  to  charge  two  cents 
per  conversation,  13;  65  per  cent, 
of  subscribers  in,  used  trunk  lines 
daily,  64;  no  space  for  new  wires 
from  London  to,  69-70;  grants 
underground  wires,  82;  cost  of 
putting  in,  82;  failed  to  secure 
cooperation  of  adjoining  local 
authorities,  264;  quarreled  with, 
over  tramways,   265 

Manchester,  Mutual  Telephone  Com- 
pany  of.   Failure   of,    154-55 

Marconi  companies.  Agreement 
with   the,   340-41 

Marconi  International  Marine  Com- 
munication Company,  Contract 
of  with   Lloyds,   344-45 

Marconi  patents  offered  to  State, 
338 

Marlborough,  Duke  of.  Letters  to 
The  Times  on  a  $50  a  year  tele- 
phone, 3,  100;  statement  re- 
tracted, 4;  retraction  not  ac- 
cepted by  many,  4,  104;  his 
promise  and  retraction,  99-114; 
promised  a  flat  rate  of  $50  a 
year,  loi;  repudiates  his  previous 
statements,  101-2;  convinced  that 
engineering  estimates  were  un- 
reliable,   103 

Metallic    circuit,    or    twin-wire    sys- 


INDEX 


375 


tern.  Introduction  of,  delayed  for 
years,  80;  obstacles  to,  in  Lon- 
don, 80-81;  rarliamcntary  Com- 
mittee reported  favorably  on, 
84-85;  estimated  cost  for,  to 
serve  10,000  subscribers,  105-7; 
by  W.  II.  Preece,  107;  necessary 
for  efficient  service  in  large  cen- 
ters,   143 

Metropolitan  London  Post  Office 
Telephone  Exchange,  Subscribers 
acquired  by,    no 

Moncur,  Provost,  Testimony  of, 
regarding   Dundee    Company,    154 

Money,  Cost  of  obtaining,  a  legiti- 
mate part  of  cost  of  plant,  33 

Money,  Waste  of,  by  the  Govern- 
ment,  71-72 

Monopoly,  An  injurious,  would 
ensue,  unless  trunk  lines  are 
owned  by  the    State,   50 

Monopoly  of  Telephone  Company 
a   qualified   one,    346-47 

Monopoly,  see  Postmaster  General's 
monopoly 

Monopoly,  The  Post  Office,  see 
Post   Office 

Monsell,  William,  on  pressure  for 
extension   of    telegraphs,   23 

Morley,  Arnold,  opposed  to  munic- 
ipal telephone  plants,  1 16-18; 
submitted  draft  of  report  dis- 
approving, 124;  on  demarcation 
of  telephone  areas,  186;  opposed 
to  competition,  198-99;  on  service 
in   small   places,   210-244 

Morton,  A.  C,  a  City  of  London 
statesman,  136-37;  on  cost  of  un- 
limited   service    in   London,    300-1 

Municipal  competition  with  Na- 
tional Telephone  Company  a 
failure,  7;  possible,  52;  objec- 
tions to,  53;  Post  Office  gave  no 
thought  to,  55;  Post  Office  ex- 
perts opposed  to,  1 19-21,  200-2; 
abandoned  as  an  utter  failure, 
261,   289 

Municipal  corporations  in  time  of 
William   IV.,   354-55 

Municipal  Journal,  Destructive 
policy  advocated  by,  307;  on  the 
Glasgow   plant,    328 

Municipal  ownership  of  tramways 
and  electric  lighting.  Experience 
of  years  in,   266,   336 

Municipal  telephone  exchanges,  312- 
36 


Municipal  telephone  plants,  Post- 
master General  Moriey's  opposi- 
tion to,  1:6-18;  Mr.  Ilanbury  on 
difficulty  of  establishing,  184-86; 
would  prevent  development  in 
rural  districts,  201;  difficulties  of 
administration  of,  201-2,  W.  H. 
Preece  opposed  to,  202 

Municipal  telephone  ventures  prove 
complete   failures,   7 

Municipal  telephones,  Demand  for, 
limited  to  Scotland,   122 

Municipalities,  Desire  of,  to  regu- 
late charges  of  National  Tele- 
phone  Company,   3 

Municipalities  misuse  power  of 
veto,  93-94;  recommended  to  re- 
fuse way-leaves,  94;  from  1892 
to  1896  annulled  the  Act  of  1892, 
97;  care  nothing  for  the  public 
interest,   251 

Municipalities,  telephone-owning. 

Demand  of  the,  300-3,  311;  de- 
structive policy  of,  306-7;  in- 
ability of,  to  contribute  to  prog- 
ress, 335-36 

Munro,  Thomas,  on  discontinuance 
of  payments   for  way-leaves,  303-4 

Murray,  Sir  George  Herbert,  on 
the    Agreement   of    1905,    298 

National  Telephone  Company,  Mu- 
nicipalities desire  to  regulate 
charges  of  the,  3 ;  absorbed  New 
Telephone  Co.,  4;  watered  its 
stock,  5 ;  granted  leave  to  erect 
poles  and  lay  wires,  5;  without 
way-leaves  until  1897,  6;  popular 
dissatisfaction  with,  6;  stock  of, 
depreciated  by  Telegraph  Act,  6- 
7;  municipal  competition  with,  a 
complete  failure,  7;  Government 
contracted  to  purchase  property 
of  at  end  of  191 1,  7;  Parliament 
to  decide  on  holding  or  selling 
same  to  local  authorities,  7; 
compelled  to  sell  trunk  wires  to 
Government,  19;  charged  by  Mr. 
Hanbury  with  giving  preferential 
rates,  26-27;  rio  evidence  of  un- 
fair competition  by,  27-28;  field 
of  operations  of,  31;  amalgama- 
tion of,  with  United,  and  Lanca- 
shire, 31;  absorbed  ten  smaller 
companies,  31;  motives  for  con- 
solidation, 31-32;  fusion  on  basis 
of    market    values,    32;    shares    of 


376 


INDEX 


National  Telephone  Co.  {continued) 
taken  at  par,  32;  capitalization 
of  new  company,  32,  104;  forty- 
two  per  cent,  of  "water,"  32, 
104;  neutralized  by  invested  sur- 
plus, 34;  net  revenue  of,  35; 
reduction  of  revenue,  36;  plant 
of,  reconstructed,  36;  criticism  of, 
for  high  charges,  37;  compulsory 
sale  of  its  long-distance  service, 
39-62;  service  in  400  cities,  40; 
successes  achieved  by,  41 ;  lodged 
Bills  in  Parliament  for  rights  of 
way,  41,  82;  Government  did  not 
dare  dismiss  Bills,  41-42;  limited 
rights  of  way  conferred  on,  43; 
compelled  to  sell  trunk  lines,  43, 
61-62;  trunk  lines  erected  under 
license  from  Post  Office,  44; 
annual  rentals  paid  for,  44n; 
dependent  on  good-will  of  the 
government,  45;  Bill  authorizing 
$5,000,000  for  purchase  and  ex- 
tension of  trunk  lines  of,  50;  no 
extension  of  license  granted  to, 
50;  three  years  in  settling  terms 
of  transfer,  51;  the  cash  con- 
sideration, 51;  relinquished  right 
to  establish  local  telephone  areas, 
51;  desired  very  large,  and  argu- 
ment for  of  Mr.  Gaine,  52-53; 
to  protect  itself  against  municipal 
competition,  52;  willing  to  pay 
for  trenching  on  Post  Office  reve- 
nue, 53;  request  of,  rejected  by 
Post  Office,  54;  obliged  to  buy 
all  outstanding  licenses  and  turn 
them  over  to  Post  Office,  55; 
way-leaves  conferred  on,  opposed 
by  municipal  vetoes,  56-57;  minor 
concessions  to,  57-58;  worked 
trunk  wires  for,  and  harmonious 
relations  with  Post  Office,  60; 
objection  urged  against  purchase, 
63;  erection  of  trunk  lines  a 
stimulus  to  local  exchanges,  63- 
64;  guaranteed  annual  revenue 
to  Post  Office,  65-66;  gave  notice 
of  minimum  delay  of  twenty 
minutes,  69;  mileage  of  wire  on 
sufferance,  76-77;  contracts  for 
private  way-leaves,  77-78;  mul- 
tiplicity of  exchanges  in  London, 
79;  unable  to  locate  contracts  in 
London,  79,  196;  case  of  Mr. 
Flannery,  79-80;  loss  to,  from 
erecting    overhead    wires,    81-82; 


Bill  for,  opposed  by  Government, 
86;  request  for  right  of  appeal 
denied  to,  88;  Government  in- 
terested in  prosperity  of,  89-90; 
contracts  for  underground  way- 
leaves,  92-93;  refused  by  Edin- 
burg,  Glasgow  and  Brighton,  94- 
95;  onerous  conditions  imposed 
on,  95-96;  number  of  cities 
granting  way-leaves  to,  96-97; 
takes  one-third  of  New  Telephone 
Co.'s  stock,  loi;  absorbs  the 
Company  with  practically  no  prop- 
erty, 102;  could  have  given  Lon- 
don unlimited  service  at  $50,  104; 
net  earnings  of  Company,  104-5; 
surplus,  105;  increase  in  London 
subscribers,  no;  divided  field  of 
London  with  Post  Office,  no; 
causes  of  public  dislike  of,  113; 
the  Government's  agent,  118; 
could  not  give  satisfactory  serv- 
ice without  way-leaves,  121;  first 
efforts  for  underground  way- 
leaves  in  London,  125-26;  sum 
spent  on  overhead  twin-wires, 
126;  reply  to  demands  of  Lon- 
don County  Council,  127-28; 
charges  for  London  area,  i27n; 
offer  of  a  measured  service  re- 
fused, 128;  charged  with  refusing 
service,  129;  laying  wires  under- 
ground, 130;  Postmaster  General 
secures  injunction  against,  130; 
grants  free  intercommunication 
to  Post  Office,  132;  protective 
clauses  in  Glasgow  electric  rail- 
way Act,  140;  trouble  in  Glas- 
gow, 141,  156-57;  refused  under- 
ground way-leaves  in  Glasgow, 
142,  145-48;  admits  inefficiency, 
143;  transferred  operators  to 
Post  Office  exchange  in  Glasgow, 
144-45;  offers  to  use  pipes  laid 
by  Corporation,  146;  plea  of 
W.  A.  Smith  for  way-leaves,  146- 
48;  position  of  Company  entitled 
to  consideration,  165-66;  verdict 
of  the  Commissioner  in  favor  of, 
169;  charging  normal  tariff  after 
laying  metallic  circuit  system, 
171;  hostility  of  Edinburgh  to, 
173;  Mr.  Hanbury  attacks,  177- 
93 ;  augments  popular  miscon- 
ceptions of,  179;  number  of  sub- 
scribers' lines,  179;  charge  of 
inefficient   service,    181-83;    of   se- 


INDEX 


377 


curing     large     areas,      184-86;     of 
bad     faith,      187-88;     Government 
cooperates     with,     189-90;     charge 
of   giving   preferential    rates,    190; 
offers    of,    to   give    up,    190-91;    no 
adequate   reply  to  charges  against, 
192;    mileage    of    wire    on    suffer- 
ance,   196,    inability    of,    to    estab- 
lish   measured     service,     198;     not 
a    mere    licensee,     199,    228;    Post 
Office    should    take     over    the,     in 
191 1,   200;   should   have   sole   con- 
trol,   203-4;     right     of,    to     refuse 
service,      208-10;      policy      toward 
exchanges     in     small     places,     210- 
12;    forbidden    to    erect    any    new 
exchanges,  212-13;   what  might  be 
done    by,    214,    216,    223;    conces- 
sions   to,    to    cease,    216;    practi- 
cally    exempt     from     competition, 
unwilling  to   sell  trunk   lines,  224, 
231;    Government    buys    to    break 
up   monopoly,    225;    to    supply    lo- 
cal     service,      227;       a      working 
agreement     between     Post      Office 
and,   228-29;    requests   Post   Office 
not    to     grant    license     where     ex- 
change   is    established,    229;    asks 
concessions,    230-31;    consented    to 
sale     of    trunk     lines,     231;     Mr. 
Hanbury's     renewed     attacks     on, 
241-45,     247-50;     sixth    application 
of,  for  statutory  powers,  248;  reno- 
vating    entire     plant,     248;     con- 
tracts    made     by,      ignored,     249; 
wages   paid   by,    249-50;    must   get 
consent     of     Postmaster     General 
for     new     exchanges,     251,     261; 
conditions    of    extending    licenses 
of,     252;     complete     argument     in 
quoting     Mr.     Goschen's     declara- 
tion    of    policy,     257;     Report    of 
Select    Committee    and    Telegraph 
Act      depreciated      telephone      se- 
curities,  258-59,   267-68;    per   cent, 
of    net    revenue     for     nine    years, 
259;    charges    against    unsupported 
by    conclusive    evidence,    260;    ex- 
clusion  of,   from   areas  it   had  not 
occupied     detrimental     to     public, 
262-63;    depreciation    of    its    prop- 
erty the   object  of  Telephone   Bill, 
267;   met  demands  of  Government 
most     fairly,     269;      harassed     by 
Government,     270-71;     Agreement 
of    1901    with   Post   Office,   274-79; 
grants      intercommunication      and 


identical  rates,  274;  effect  of 
Agreement  on  shares  of,  278; 
losses  of,  285;  Government 
broaches  purchase  of  provincial 
plant  of,  287;  held  90  per  cent, 
of  business  outside  of  London, 
289;  paying  for  way-leaves,  290; 
Post  Office  makes  agreement  to 
purchase  provincial  plant,  291 ; 
difficulties  of,  under  expiring 
franchises,  291 ;  capitalization  of, 
292-93n;  "water"  more  than  eli- 
minated, 292;  relinquished  prefer- 
ential rights  and  accepted  maxima 
and  minima  charges,  296-97; 
granted  free  intercommunication, 
297;  guarantees  efficient  service, 
297;  amount  spent  on  plant,  and 
otitstanding  securities,  301-3; 
Government  saved  Company  from 
serious  loss,  306;  new  business 
of  Company  until  191 1,  309,  311; 
installed  overhead  metallic  cir- 
cuit system  in  Glasgow,  316; 
handicap  on,  320;  offer  of,  to 
purchase  Glasgow  plant,  refused, 
328;  telephones  of,  in  use  at 
Hull,  331;  buys  exchange  at 
Swansea,  332;  unfair  criticisms 
of,  345-46;  transactions  between 
the  Government  and  the,  346; 
results  of  the  public  opinion  that 
profits  of  were  unduly  large, 
357;  summary  of  Mr.  Hanbury's 
work  against  the,  358-59;  sum- 
mary of  the  financial  difficulties 
of  the,  360-61 
Nationalization  of  telephone   service. 

Government  opposed  to,  47 
New  South  Wales,  Burdens  on  tax- 
payers in,  73 
New  Telephone  Company  absorbed 
by  the  National,  4;  ready  to 
cooperate  with  Post  Office,  44; 
Bill  of,  for  way-leave  powers, 
defeated  by  Government,  85-86; 
possessed  two  Post  Office  tele- 
phone licenses  covering  the  United 
Kingdom,  100;  New  Tel.  Co.  had 
difficulty  in  obtaining  telephone 
instruments  and  developing  local 
exchanges,  100;  the  Duke  of 
Marlborough  on  the,  loo-i ;  sup- 
ported Government's  Bill  to 
acquire  trunk  lines,  loi;  stock  of 
placed  on  the  market,  loi  ;  ab- 
sorbed    by     the     National,      102; 


378 


INDEX 


power  of,   under  its  licenses,    103; 

promises    in    Prospectus    of,    104; 

estimates      of,      contradicted       by 

experience    of    Post    Office,    113; 

and   of   Glasgow    exchange,    114 
New      York      Telephone      Company, 

Experience   of,   284 
Newcastle-on-Tyne      Exchange,      26; 

telephone  area  at,  broken  up,   54; 

inadequacy   of  trunk  lines  at,    70 
Newland,      John      L.,      engineering 

estimates    in    1895    for    a    $50    a 

year    London   service,    105-6,    119; 

had    no    practical    experience,    107 
Newspaper  press,   Money  wasted  on 

unprofitable    rates    for    telegraphic 

correspondence   of   the,    72 
Non-subscribers,     Permission     given 

to    call,    to    answer    telephone    in 

same    area,    57-58 
Northcote,    Sir    Stafford,    on    State 

ownership,    21-22 
North    Shields   telephone   area,   54 
Norway  and  Sweden,  Experience  of, 

119,  213,   261 
Norwich    grants     leave     for    under- 
ground   wires,    93 

Official  caprice  vs.  public  con- 
venience. Justice  Wright  on, 
134-35 

Operating  expenses,  John  Gavey  on, 
111-12 

Ownership,  Public  vs.  private,  345; 
see   also    Public    Ownership 

Parliament,  and  the  public  too  busy 
to  read  blue  books,  192;  not  free 
to  inaugurate  general  competition 
in  1898,  236;  authorizes  all-round 
competition  with  the  National 
Telephone  Company,  239-68; 
question  of  equity  in,  236, 
257-58;  treatment  accorded  by,  to 
telephone  promoters,  259;  dis- 
regard by,  of  niceties  of  de- 
mands   of    rectitude,     286 

Parliamentary  contract,  Glasgow 
asks  for  a  breach  of,  304-5; 
recommended  by  Select  Committee, 
305;  refused  by  the  Government, 
305 

Patent  laws.  Attempt  of  Post- 
master   General    to    annul    the,    15 

Pember,  E.  H.,  suggests  proviso 
to    protective     clauses,     141-42 

Pioneer  work  left  to  private  enter- 
prise,  348-49 


Plant,  Replacing  an  obsolete,  a 
proper  charge  to  operating  ex- 
penses,  38 

Poles  and  wires.  Power  to  erect  and 
lay,  not  conferred  by  Government 
licenses  for  telephones,  1 1 ;  must 
be  obtained  from  local  authorities, 
11-12;  had  to  be  erected  mainly 
as  private   property,   76 

Policy,  Telephone,  of  the  Govern- 
ment,   4;    modified,     5 

Political  expediency.  Summary  of 
the  effects  of  giving  way  to, 
357-59 

Politics,  Game  of,  incapacitates 
players  for  management  of  in- 
dustrial  ventures,    73 

Pollock,  Baron,  Postmaster  General's 
suit  for  infringement  of  monopoly, 
tried  before,    10 

Portsmouth,  Municipal  telephone 
venture  of,  a  failure,  7;  grants 
underground  way-leaves,  93; 
municipal  exchange  in  obsolete, 
333 

Postmaster  General  brought  suc- 
cessful suit  against  Edison  and 
Bell  companies  for  infringement 
of  his  monopoly,  10;  offers 
licenses  to  United  Telephone 
Company,  on  waiver  of  right  to 
appeal,  10;  licenses  conferred  by, 
merely  waived  monopoly  rights, 
1 1 ;  right  retained  to  establish 
exchanges  and  license  other  com- 
panies, 11;  on  granting  telephone 
licenses,  11-12;  attempt  of,  to 
compete  with  telephone  companies, 
14-15;  to  annul  patent  laws,  15; 
conduct  of,  morally  indefensible, 
16;  announces  purchase  of  tele- 
phone trunk  lines,  45-46;  army 
of  employees  under  the,  should 
not  be  increased,  49;  on  lack  of 
space  for  new  wires  from  London 
to  other  cities,  69-70;  powers  of 
enlarged,  83 ;  had  power  to  lay 
wires  under  streets,  84;  powers 
of,  under  Telegraph  Acts  of  1892, 
93-94;  opposed  to  municipal 
telephone  plants,  ii6-i8;  to 
competition  by  the  Post  Office, 
124;  denied  underground  way- 
leaves  in  Glasgow,  172;  won  on 
appeal,  172;  should  have  sole 
control  of  telephones,  203; 
scientific  advisers  of  the,  praised 
the    work    of   the    Telephone    Co., 


INDEX 


379 


241 ;  to  issue  licenses  to  local 
companies,  252;  to  fix  charges, 
252,  254;  to  provide  underground 
wires  at  a  rent,  274-75;  bound  in 
license  to  buy  plants  of  compet- 
ing companies  but  not  of  Tele- 
phone Company,  256;  to  buy 
Metropolitan  plant  in  191 1,  275; 
to  buy  provincial  plant  in  191 1, 
294-95 ;  also  private  wire  plant, 
295;  to  lay  underground  wires  at 
a  rental,  296;  will  grant  no 
further  licenses,  298;  purchases 
Glasgow  plant,  321-23;  raises 
tariffs,  327-28;  buys  Brighton 
telephone  system,  329-30;  offer 
of,  to  Portsmouth,  333;  rights  of 
waived,  not  given  away,  346 
Post  Office  throws  every  possible 
difficulty  in  way  of  development 
of  telephone,  16;  granted  leave 
by  Treasury  to  establish  telephone 
exchange  systems  conditionally, 
19;  prohibited  from  canvassing  for 
business,  19-20;  must  show 
telephone  exchanges  would  be 
profitable,  20-21;  possibility  of 
competition  by,  productive  of 
good  results,  25-26;  number  of 
employees  in,  should  not  be  largely 
increased,  47-48;  unwilling  to  com- 
mit itself  in  municipal  competition, 
53;  unwilling  to  build  trunk  wires 
to  more  than  one  exchange  in  a 
local  area,  53 ;  broke  up  the 
Birmingham  area  into  four,  54; 
charges  for  use  of  trunk  wires 
and  has  failed  to  increase 
facilities,  54;  aimed  to  serve 
public  convenience,  55;  reserved 
right  to  authorize  competition, 
56;  fails  to  provide  adequate  long- 
distance service,  63-73;  charged 
with  grave  defects  in  trunk 
service,  68;  opened  its  London 
telephone  system  in  1902,  108; 
cost  of  "spare"  plant,  108-9; 
opposed  to  unlimited  service,  no; 
retained  it,  and  established  a 
measured  service  rate,  lio-ii; 
what  experience  of,  shows,  113; 
telephone  receipts  and  expenses, 
ii3n;  experts  of,  opposed  to 
municipal  competition,  119;  offers 
service  on  a  reasonable  demand, 
120;  Mr.  Morley  opposed  to 
competition       by,        124;       joined 


London  County  Council  against 
National  Telephone  Company  in 
every  way,  130-32;  false  claims 
attributed  to,  135-37;  grants 
London  way-leaves  at  its  pleasure, 
138;  gave  free  hand  to  telephone 
exchanges,  191;  should  take  over 
the  National  Telephone  Company 
in  191 1,  200;  tendered  no  esti- 
mates in  1898,  206;  opposed  to 
the  flat  rate,  206-7;  established 
both  rates  in  London,  207;  filled 
place  of  National  Telephone 
Company  in  new  fieldSj  214; 
purchase  by,  out  of  the  question, 
242;  provided  in  1899  with 
money  for  telephone  plants,  240, 
251;  less  than  one  half  expended, 
263;  conservatism  of,  262-63; 
demanded  guarantee,  263;  could 
not  promise  intercommunication  in 
London,  270;  unfair  competition 
of,  271-72;  enjoined  Telephone 
Company  from  laying  wires  under 
London  streets,  273;  agreement  of 
1901  with  Telephone  Co.,  274-79; 
agreement  of  1905  to  purchase 
provincial  plant,  291;  reasons  for 
restricting  wireless  telegraphy, 
341-42. 

Post  Office,  see  also  Government. 

Post  Office  monopoly  of  the  tele- 
graphs, a  great  interest,  45; 
telephones  included  in,  86 

Post  Office  royalty  of  ten  per  cent, 

Post  Office  Telegraph  Monopoly, 
The,  and  wireless  telegraphy, 
337-47;  open  to  attacks  of  new 
inventions,    338;    perpetual,    351 

Post  Office  telegraphs,  Traffic  of, 
threatened,  40;  losing  business, 
43;  protected  from  telephone,  58; 
Government  opposed  telephones 
as  competitors  of,  85-86 

Post  Office  Telephone  Exchange 
system.  Attitude  of  Government 
toward,    19 

Post  Office  telephone  plants.  Right 
to   establish    reserved,    56 

Power,  Misuse  of,  by  Government 
and      municipalities,      astounding, 

354 
Preece,  W.  H.,  on  unfair  competi- 
tion, 27;  on  "a  free  hand"  for 
the  Post  Office,  27;  estimate  of 
cost  of  overhead  and  under- 
ground   system    for    London,    107; 


380 


INDEX 


Preece,  W.   H.    (.continued) 
opposed  to  municipal  licenses,  1 19, 
202;    on    the    stupidly    obstructive 
city    people,     135;     tendered     esti- 
mates,    206;    would    choose    rural 
districts,    213,    244;    time    required 
for   an   alternative    plant,    219;    on 
good    service    of    Telephone    Co., 
248;  on  wages,  249;  rural  districts 
had   been   canvassed    without   suc- 
cess, 262;   on  cost  of  underground 
metallic  circuit   system    outside   of 
London,     313;     on     the     Marconi 
Co.'s  check  to  growth  of  wireless 
telegraphy,     344-45 
Preferential    rates.    Agreements   and 
offer    of    National    Telephone    Co. 
not    to    give,    190-91 
Pressure,     Parliamentary,     and     log- 
rolling. Precautions  against,  21-22; 
Mr.    Scudamore    on,    22-23 ;    from 
telegraph    clerks    on    members    of 
Parliament,    24-25 
Private    lines.    Number   of,    1790 
Private     ownership     gives     rise      to 

grave   abuses,   353 
Private    property.    Should    telephone 
attachments    to,    be    allowed,    196; 
violation    of    rights    of,    362 
Private    rights    of    way,    the    almost 
sole       dependence      of      telephone 
companies,    76 ;    short    notice    con- 
tracts for,  with  subscribers,  77-78; 
cost   of   in    London,   78 
Private     telephone     lines,     long-dis- 
tance.   Question    of    supplying,    70 
Profits,     Reasons     for     decline     of, 

35-36,    37 
Property,  Everybody's,  safe  for  five 

months,     192 
Protective    measures.    Petty,    343 
Provincial  Companies,  Leading,  30-31 
Provincial     telephone     system     must 
be       purchased       or       duplicated, 
289-90;    duplication    impracticable, 
290-91;      Post     Office     agrees     to 
purchase,  291 
Prussia,   Failure   of  Government  of, 
in     financing     the     state     railways, 
73;     surplus     earnings     used     for 
current  state  expenses,    73 
Public,    Failure    of    the,    to    discern 
its      long-run      interests,      363-64; 
inconvenience     to,     from     State's 
purchase,  70;  protection  from,  83; 
rights    of,    completely    disregarded 
by  State  and  municipalities,  97-98 


Public  authority  has  power  to  regu- 
late profits  and  to  prescribe  prices, 
176 

Public  convenience,  not  official 
caprice,  should  govern  boards, 
134-35;  Mr.  Hanbury  on  272-73; 
effect  of  injunction  on,  273-74; 
disregard   of,  by   Government,   286 

Public  distrust  of  National  Tele- 
phone   Co.,   Causes   of,    113 

Public  opinion  confused  by  issue 
raised,  28^  the  making  of,  129-30, 
135-36,  169-71;  summary  of, 
355-57;  oi  intelligence  and  in- 
tegrity needed,  247,  352;  misin- 
formed, 347;  break-down  of, 
363-64;  the  more  notable  by 
reason  of  its  previous  success,  364 

Public  ownership,  Politics  of,  123; 
fatal  defect  of  the  policy  and 
practice  of,  348;  open  to  grave 
abuses,    353 

Public  pay  stations  not  allowed  to 
telephone  companies,  12-13;  per- 
mission given  for,  for  verbal 
messages  only,  18;  leave  to  es- 
tablish,   granted,    58 

Public  servants.  Complaints  in 
House   in   behalf   of,    48 

Public  service  companies.  Public 
prejudice    against,    356 

Purchase  terms  named  in  Treasury 
Minute,    256-57. 

Question  of  equity  in  granting  all- 
round    competition,    236,    257-52 

Railway  and  Canal  Commissioners, 
Judgment  of,  on  way-leaves,  given 
by  Justice  Wright,  134-3S;  to  be 
arbitrators  under  Agreement  of 
1905,    294-95 

Rates,  Flat,  demanded  by  London 
County  Council,  126-27;  by  the 
public,  207;  low,  would  mean 
ruin,    208 

Rates,  General  reduction  of,  out- 
side of  London,  35-36;  should  be 
maintained  at  a  fair  point,  107-8, 
120,  200;  for  unlimited  and 
measured  service,  iio-ii;  pro- 
posed   Sheffield,    198 

Rates,   see   also    Tariffs 

Rectitude,  Disregard  for  the  niceties 
of,    286 

Restrictive    measures    relaxed,    16-18 

Revenue   from   State   telegraphs,   Mr. 


INDEX 


381 


Fawcett's  anxiety  to  protect  the 
17 

Revenue,  Net,  of  National  Tele- 
phone   Company,    259 

Revenue,  public,  Protection  of,  46, 
55 ;    necessity    for,   49-50 

Rothschild,  N.  M.,  and  Sons,  offer 
New  Telephone  Co's  stock,  loi ; 
The  Economist  on,    loin 

Routes,  Circuitous,  for  lack  of 
way-leaves,   78 

Royalties  paid  by  telephone  com- 
panies, 12;  of  10  per  cent  on 
gross  receipts,  retained,  18; 
average,  in  London,  197;  amount 
of,   paid    to    Post    Office,   299 

Rural  districts.  Local  authorities  in, 
took   no   steps    for   telephones,   262 

Russell,  Sir  A.  J.,  voiced  bitter 
opposition  to  National  Telephone 
Company,  in  Edinburgh,  94-95; 
W.  E.  L.  Gaine  on  the  ethics  of, 
95 

Salaries  paid  by  ttie  State  not  fixed 
by  market   price,   48 

Sale,  Compulsory,  at  structural 
value,    121-22 

Salford,  Opposition  of,  to  coopera- 
tion  with    Manchester,  264 

Salisbury  Ministry,  The  Conser- 
vative, accepted  report  of  the 
Select    Committee    of    1898,    238 

Salvesen,  E.  T.,  on  National  Tele- 
phone Co.,  170;  on  freezing  out 
the  Telephone  Co.,  from  Glasgow 
by  unfair  competition  315;  on 
impairment  by  electric  railways, 
316;  system  should  not  be 
doubled,    317 

Scudamore,  F.  L,  on  pressure  for 
better  telegraph  service,  22-23; 
amount  expended  by,  on  tele- 
graphs, 23 

Securities  at  a  discount  and  at  a 
premium,  Difference  between,  the 
reward  of  investor's  courage  and 
ability,    33-34 

Securities  sold,  Difference  between 
face  value  of,  and  cash  obtained, 
part  of  cost  of  telephone  plant,  33 

Securities,  Telephone,  depreciated, 
257-58 

Security,  Right  to  demand,  209; 
required   by   gas  companies,   210 

Select  Committee  of  1885,  reported 
favoring   same   rights  of   way    for 


telephone  as  for  other  public 
service  companies,  37,  83-84; 
enlargement  of  powers  of  Post- 
master General  and  his  licensees, 
83 ;  recommended  overhead  wires, 
84;  Government  opposed  to  recom- 
mendations,  87 

Select  Committee  of  1895,  J.  t>. 
Forbes,  on  negotiations  between 
the  two  companies,  103;  chapter 
on  the,  115-24;  J.  W.  Benn  on 
the  Agreement,  n6;  made  no  re- 
port,   123-24 

Select  Committee  of  1898  on 
licensing  local  authorities,  193; 
chapter  on  evidence  presented  be- 
fore, 194-214;  testimony  of  Sir 
Robert  Hunter,  solicitor  to  Post 
Office,  195-96;  Mr.  Gaine  on 
wires  in  place  on  sufferance,  196; 
Mr.  Forbes  on  reasons  for  high 
tariffs,  196-97;  on  investment 
under  short-lived  franchises,  197; 
Mr.  Gaine  on  measured  service, 
198;  Mr.  Morley  on  competition, 
198-99;  J.  C.  Lamb  on  rival 
systems  and  competition,  199-202; 
W.  H.  Preece  opposed  to  muni- 
cipal telephone  plants,  202;  Asso- 
ciation of  Municipal  Corporations, 
203-4;  Messrs.  Clare  and  Gaine, 
204;  Mr.  Morley  on  service  in 
small  places,  210;  J.  C.  Lamb, 
211-12;  Sir  James  Fergusson,  212% 
summary  of  evidence  before,  214; 
Report  of,  215-38;  recommends 
all-round  competition,  215-16; 
not  supported  by  the  evidence, 
216;  possible  breach  of  faith 
suggested,  218-19;  ignores  state- 
ments by  Mr.  Forbes,  219;  hypo- 
thetical arguments  of,  220-21;  in 
direct  conflict  with  testimony  of 
J.  C.  Lamb,  221-22;  a  restatement 
of  Mr.  Hanbury's  charges,  223; 
reported  that  Post  Office  could 
end  the  monopoly  of  the  Tele- 
phone Co.,  237;  the  report 
knocked  25%  off  the  securities  of 
the  Telephone  Co.,  238;  testimony 
before,  that  municipal  competition 
would  prove  a  failure,  267;  dis- 
regard of  niceties  of  demands  of 
rectitude,  286;  A.  R.  Bennett  on 
ascertained  cost  of  Glasgow  sys- 
tem, 313;  D.  Sinclair  on  cost  of 
installation    dependent    on    spare 


382 


INDEX 


plant,  313-14;  why  no  overhead 
system    can    be    efficient,    316-17 

Select  Committee  of  190S  o"  Tele- 
phone Agreement,  298;  W.  E, 
Gaine  on  the  hard  bargain,  299; 
on  par  value  of  shares,  301;  de- 
mand of  telephone  owning  munici- 
palities, 300-3;  D.  M.  Stevenson 
on  the  tariffs,  300;  A.  C.  Morton 
on  cost  of  unlimited  service  in 
London,  300-1;  H.  E.  Haward  on 
price  to  be  paid,  301-3;  T. 
Munro  on  discontinuance  of  pay- 
ment for  way-leaves,  303-4;  D. 
M.  Stevenson  asks  for  a  breach 
of  a  Parliamentary  contract, 
304-5;  request  endorsed  by,  re- 
jected by  Government,  305,  31  t; 
recommended  unfair  competition, 
306;  rejected  by  Government,  306; 
H.  B.  Smith  on  municipal  ex- 
perience,   334-35 

Select  Committee  on  Post  Office, 
190s.    70-71 

Select  Committee  on  Purchase 
Bill  reported  favorably,    50 

Select  Committee  on  Telegraphs 
Bill  of  1892,  59;  Bill  of  1S98, 
67,  76-77,  79;  testimony  before, 
143-44 

Select  Committee  on  Telephone  Serv- 
ice of  1895,  Testimony  before, 
87-88;  Sir  A.  J.  Russell  to,  94-9S; 
J.  S.  Forbes,  144,  187;  evidence 
taken  before  referred  to  Com- 
mittee   of    1898,    195 

Service,  adequate,  Poor  prospect  of, 
310 

Service,  inefficient.  Causes  of, 
149-52;  complaints  of  little  im- 
portance, 150-51;  overhead  single 
wire  chiefly  responsible  for,  151; 
Hanbury's  charge  of,  181 ;  Mr. 
Forbes  on  reasons  for  relative 
dearness  of,  196-97;  right  of  Com- 
pany to  refuse,  208-10;  in  small 
places,    210 

Service  rate.  Measured,  iio-ii,  iq8; 
larger  users  of  telephone  opposed 
to,  198;  tariff  for,  established, 
275-76;    question    of,    283 

Service  rate.  Unlimited,  of  $50  a 
year,  promised  for  Metropolitan 
London,  4;  of  $25  demanded  for 
large  cities,  5;  iio-ii,  198;  H.  B. 
Smith  on  the,  207;  tends  to  over- 
loading  of   lines,   207;    tariff    for, 


established,  275;  for  expediency, 
283 

Service,  telephone.  Public  dissatis- 
faction with,  6;  intense,  41;  local, 
left  to  private  companies,  48n; 
adequacy   of,    118 

Sheffield  rate.   The   proposed,   198 

Sinclair,  D.,  on  introducing  twin- 
wire   system,   80-81 

Sinking  fund  contributions  a  heavy 
burden,     197 

Smith,  H.  B.,  on  responsibility  for 
delays,  70-71;  opposed  to  un- 
limited service  rate,  207;  on 
impossibility  ot  raising  capital 
without  security  of  sale  of  plant 
at  end  of  term,  294;  on  the 
Agreement  of  1905,  298;  on 
profits  of  Telephone  Co.,  321;  on 
municipal    experience,     334-35 

Smith,  W.  A.,  plea  for  way-leaves 
in    Glasgow,    146-48 

Smith,  W.  H.,  strongly  opposed  to 
nationalization,    49 

South    Shields   telephone   area,   54 

Southend,  Guarantee  required  be- 
fore  building   extension    to,    66 

Southport  offered  a  license  in  1903, 
261 

Spare  plant.  The,  requires  a  large 
amount  of  capital,  109;  amount 
of,    needed,    314 

Stanley,  Edward  George  Villiers, 
Lord,  on  necessity  of  refusing 
new  wires  from  London  to  other 
cities,  69-70;  on  granting  free 
inter-communication  in  1905,  2S1, 
306;  on  infringement  of  a 
statutory  right,  305;  on  Telegraph 
Act  of  1899,  307-8;  on  the  capital 
investment  required,  30S-9;  de- 
fends Wireless  Telegraphy  Act, 
339;  suspicious  of  innovations,  343 

Starke,  Councillor,  of  Glasgow,  and 
his   anonymous  estimate,    142-43 

State,  The,  as  a  competitor  in  trade, 
must  not  anticipate  demand,  i;o; 
Sir  S.  Northcote  on,  21-22;  diffi- 
culties of  the,  as  an  employer, 
47-48;  growing  disposition  of  the 
public  to  place  new  duties  on  the, 
not  wise,  49;  acquires  the  long- 
distance telephone  service,  49-51; 
to  demarcate  local  telephone 
areas,    51-56 

State  monopoly.  Unchanging  spirit 
of,   344 


INDEX 


883 


State  Telegraphs,  Game  of  politics 
in  administration  of,  350;  pro- 
tection of,  351 
Statesmen,  Certain,  of  London, 
denied  way-leaves  and  then  de- 
nounced the  service,  81-82;  one 
of  the,  136 
Statistics,     British     and     American, 

310 
Statutory    obligations,    24S 
Stephen,     Justice,     renders     verdict 
that      Postmaster      General's     mo- 
nopoly  cavers    the    telephone,    10; 
United    Telephone   Co.    makes   pre- 
parations  to   appeal    from   decision 
of,    10;    decision    of,    accepted    by 
patentees    of    apparatus    for    wire- 
less     telegraphy,       ii;      no      just 
ground    for    decision   of,    16 
Stevenson,    D.    M.,   on    conservatism 
of   local  authorities,   264;   declared 
the   tariffs   much   too   high,   300 
Stock    watering,    Legitimate,    the    re- 
ward  of    those    who   assumed    risk 
of    development,     34;     neutralized 
by  the   investment  of  accumulated 
surplus,  34,  37 
Stockholm      not      comparable      with 

Glasgow,    154 
Stournmouth-Darling,       Lord,       pre- 
sided in  Glasgow  appeal  case,  172 
Street  railway  industry,  123 
Streets,   Nature  of  public's   property 
in    the,     162-63,     i75;     much    con- 
fusion   regarding,    356-57 
Streets,     Veto    power    demanded    to 
secure    payment    for    use    of,    88, 
184 
Stuart,   James,  Witness  coached  by, 

129 
Subscribers,     Estimated    and    actual 
increase    in    number    of,     109-10; 
measured    service,     1 1 1 ;     cost    of 
calls,     112;    average    annual    sum 
paid  by,  in  London,  197;  asked  to 
supply  one  support  for   wires   free 
of    charge,    208-9 
Subscribers    to    Telephone    Co.    out- 
number   the     Post    Office's,     279; 
waiting    for     service,     292 
Subscription  charges,  Local  authori- 
ties  desire   to    prescribe,    88 
Subscription      rate,      Annual,      with 

access   to   a    trunk   line,    64 
Submarine   Telegraph   Co.   forced  to 
sell   to    Government,    337;    protec- 
tion for,  351 


Swansea,  Municipal  telephone 
venture  of,  a  failure,  7;  sold 
its  obsolete  exchange  to  Na- 
tional Telephone  Co.,  331-32; 
tariffs   in,   332 

Tariffs,  Unlimited  user,  5;  Mr. 
llanbury  insinuates  that  NationaV 
Telephone  Co.  might  raise,  187-, 
J.  S.  Forbes'  pledges  regarding 
the,  187-88;  relatively  high,  196- 
97;  joint,  established,  275-76;  in 
Brighton,  329-3on;  in  Hull  area, 
33in;  at  Swansea,  332.  See  also 
Charges,  Rates 
Taxation,    unequal,    \^iciousness    of, 

and   class   legislation,    176 
Taxpayer,   Safeguard  of  the,  46 
Telegrams,    Charges   for,  cut  nearly 

in  two,  89 
Telegraph  Act  of  1899  enacted,  6; 
complete  failure  of,  7;  did  not 
give  Post  Office  right  of  inter- 
communication, 131;  provisions 
of,  251-54;  did  not  bind  Post- 
master General  to  buy  any  plants 
of  Telephone  Co.,  254;  effect  of, 
on  Mr.  Hanbury's  promotion,  260, 
267;  a  ludicrous  failure,  261,267, 
288;  two  reasons  for  failure, 
263-65;  outcome  of  Mr.  Hanbury's 
onslaughts  and  Report  of  Select 
Committee  of  1898,  266;  aban- 
doned for  London,  in  two  years, 
281;  achieved  nothing  that  ne- 
gotiation could  not  have,  282-83; 
failed  to  accomplish  Mr.  Han- 
bury's wish,  289 
Telegraph  business.  Telephone 
makes  inroads  upon  the,  40-41; 
increased  cost  of,  42;  real 
danger  of  injury  to,  43-46;  reform 
in  administration  of,  politically 
inexpedient,  61;  no  English  city 
desired  to  engage  in,  122 
Telegraph   clerks,   Pressure    from   on 

members    of    Parliament,    24-25 
Telegraph    service,    Mr.    Scudamorc 
on     pressure     for     extension     of, 
22-23;    Mr.    Monsell   on,    23;    cost 
of  the  system,   23 
Telegraph       tariff.       Reduction       of, 
weakened     Post    Office    telegraphs 
for  task  of  competition,   42 
Telegraphs  Act  of    1892   enacted.   92 
Telegraphs   Bill,    1892,  approved  by 


384 


INDEX 


Select  Committee,  59,  82-83.  See 
also   Telegraph   Act. 

Telegraphs,  national.  Desire  of  the 
State  to  protect  the,  from  com- 
petition of  the  telephone,  3,  4; 
unsatisfactory,  4;  protected,  12-13; 
results  of  Government's  policy 
of  protection  of,  15;  Mr.  Fawcett 
on  new  policy  for,  17-18;  disap- 
pointments at  results  of  experi- 
ment with,  24-25,  34;  a  vyarning, 
25;  made  unremunerative  by 
Commons,  89-90 

Telephone,  Efforts  of  companies  to 
popularize,  thwarted,  12-13,  28-29, 
39;  spread  of,  alarms  the  Govern- 
ment, 40;  increased  competition 
from,  unwelcome,  42;  spread  of, 
checked  by  terms  of  license,  45; 
commercial  importance  of,  67 ; 
Government  fears  the,  85-86 ; 
development  of  in  rural  districts, 
201;  public  demand  for  the,  293; 
popularization  of  the,   360,   361 

Telephone  business,  Disraeli  and 
Gladstone  ministries  refuse  to  take 
up  the,   25 

Telephone    calls.   Cost   of,  207-8 

Telephone  companies  not  allowed  to 
build  trunk  lines,  13;  permitted 
to  build  them,  18;  licensed  by 
Postmaster  General,  86:  resolution 
of  Association  of  Municipal  Cor- 
porations on,  93-94;  should  have 
a   free  hand,   191 

Telephone  exchanges.  Moribund 
state  of,  26 ;  cost  of  installing, 
104;  confusion  in  multiplicity  of, 
117;  assumptions  of  cost,  206-7; 
not  a  single  rural  or  urban  dis- 
trict established  a,  213;  estab- 
lished in  five  cities,  213,  288; 
appropriation  to  make  moribund, 
active  competitors,  240;  and  to 
establish  in  non-populous  dis- 
tricts, 240 

Telephone  industry  paralyzed,  14- 
15;  checked  in  a  manner  which 
cannot    be    maintained,    50 

Telephone  instruments  difficult  to 
obtain,    100 

Telephone  licenses,  Mr.  Fawcett's 
announcement  concerning,  11-12; 
restrictions  on,  anu  time  limit  for, 
12-13;  attempt  to  issue,  to  rivals 
of  telephone  companies,  14;  re- 
strictions  on,   relaxed,    16-17 


Telephone  licenses  of  1881  and 
1884,    8-29.     See   also    Licenses 

Telephone  plants.  Purchase  of,  by 
the  Government,  4;  option  on, 
18;  Bill  authorizing  money  for 
purchase   of  trunk   wires,   50 

Telephone  policy  of  the  Govern- 
ment and  the  municipalities,  In- 
jury done  the  people  by  the,  361- 
63 

Telephone  policy  of  Great  Britain, 
Four  factors  in  shaping  of  the, 
3,  4;  modified,  5;  paralyzed  the 
industry,    15 

Telephone  service.  Public  demand 
for  expansion  of,  43-44>  46,   50 

Telephone  services.  Analysis  of 
various,  320-in 

Telephone  statistics,  British,  15, 
18-19,  40,  310;  United  States, 
15-16,  310 

Telephone  system.  Superiority  of 
metallic   circuit,    41,    47 

Telephone  systems,  Number  of,  in- 
stalled by   Post    Office,    26 

Telephone  tariffs,  Unlimited  user, 
demanded,  5.  See  also  Charges, 
Rates,    Tariffs 

Telephone  wires.  Eighty-four  per 
cent,    of,   exist   on   sufferance,    76- 

77 

Telephones  are  telegraphs  and 
therefore  a  monopoly  of  the  Post- 
master General,  86,  189;  would 
not  be  used  by  large  masses  of 
people,    117 

Telephones,  Ratio  of,  to  people, 
243-44;  in  use  in  London,  279; 
proportion  of  subscribers  to,  in 
United  Kingdom  and  in  United 
States,    310,    359-60 

Thompson,  Sylvanus  P.,  approved 
engineering  estimates  of  the  New 
Telephone   Co.,    100 

Times,  The,  on  restricted  licenses, 
16 

Traffic,  Intra-city,  and  short  inter- 
city, taken   up  by  telephone,    42 

Tramways  Act  of  1870,  Refusal  of 
several  Governments  to  amend, 
97-98 

Treasury,  Lords  of  the,  on  Post 
Office  telephone  exchanges,  19; 
against  active  competition  with 
telephone  companies,  19-20;  take 
precautions  against  log-rolling, 
21-23:  abstention  policy  aban- 
doned,   25 ;    not   inconsistent   with 


INDEX 


^85 


necessary  competition  to  correct 
evils,  25-26;  conservatism  of  the, 
66.     See  also   Government 

Treasury  Minute  upon  proposals  for 
development  of  the  telephone 
system,  laid  before  Parliament, 
49-50,  227-28 

Treasury,  national.  Interests  of, 
preferred  to  rights  of  public,  4, 
46;   specially  cared   for,   222 

Trunk  lines.  Telephone  companies 
not  allowed  to  build,  13;  per- 
mission given  all  licensees  to 
erect,  18 ;  erected  under  license 
from  Post  Office,  44,  46;  Bill 
authorizing  purchase  of,  50; 
erection  of,  a  stimulus  to  local 
exchanges,  63-64;  J.  C.  Lamb  on, 
64;  W.  E.  L.  Gaine  on,  64; 
Treasury  rule  on  extension  of, 
64-65 ;  extended  under  guaran- 
tees, 66;  evidence  of  failure  of 
Government  to  supply,  66-71;  J. 
C.  Lamb  admitted  lack  of,  66; 
H.  E.  Clare  on  need  of,  66-67; 
Mr.  Gaine's  constant  call  for,  67; 
Sir  James  Fergusson  on  giving, 
67;  Mr.  Lamb  on  difficulty  of 
getting  money  for,  67;  Lord 
Harris  on  insufficiency  of,  68; 
Mr.  Gaine  on  trunk  delays  and 
cost  to  make  service  adequate,  68; 
notice  of  minimum  delay  required, 
69;  Association  of  Chambers  of 
Commerce  on,  69;  Lord  Stanley 
on,  69-70;  inadequacy  of,  at 
Newcastle,  70;  sums  spent  in 
extending,  70 ;  niggardly  economy 
in  expenditure  for,  72;  Treasury's 
interest     in     conserved,     222 

Tunbridge  Wells,  Municipal  tele- 
phone venture  of,  a  failure,  7; 
sold  out  to  National  Telephone 
Co.,    333-34 

Twin-wire  plant.  Municipal,  in 
Edinburgh,    94-95 

Twin-wire  system,  Unreasonable  to 
require  Company  to  install,  in 
Glasgow,    156 

Underground  way-leaves.  Proba- 
bility of,  in  London,  81 ;  granted 
in    Manchester,   82 

Underground  wires.  Postmaster  Gen- 
eral had  power  to  lay,  84;  recom- 
mended by  Committee  of  1893, 
84-85;    veto-power    given    to    local 


authorities,  6,  87-89;  first  granted 
in  Manchester,  92;  Post  OHicc 
claim  of   right  to   lay,    136-37 

United  Telephone  Company  refused 
to  submit  to  invasion  of  its 
monopoly  rights,  14;  Mr.  Fawcett 
refuses  request  anc  offer  of,  17; 
Post  Office  reserved  right  to  com- 
pete with,  18;  confined  to  Metro- 
politan London  area,  30;  supplied 
instruments  tu  other  companies 
serving  specified  areas,  30;  shares 
of  taken  at  250,  32;  dividends 
for  four  years,  35;  gave  poor 
service,  36;  refused  rights  of  way 
in  the    streets,    37 

Unlimited  service  rate,  iio-ii; 
cost  of,  would  exceed  $50  a  year, 
:ii-i2;  254-55;  joint  rates,  275-76; 
Mr.  Hanbury's  false  promise. 
276;  established  for  expediency, 
283;  A.  C.  Morton  on  cost  of, 
300-1.  See  also  Charges,  Rates, 
Service,   Tariffs 

X'alues,  Increase  in.  properly 
recognized,     33-34 

V^rnon-Harcourt,  Sir  William,  on 
National  Telephone  Co.,  the 
Government's    agent,     118 

Veto-power  against  way-leaves  de- 
manded for  local  authorities,  5; 
granted,  6;  the  municipal,  56-57; 
absolute,  on  exercise  of  way- 
leave  powers,  57;  granted  on  de- 
mand of  Association  of  Municipal 
Authorities,  87-88,  91;  why  de- 
manded, 88;  absolute,  under  Act 
of  1892,  89;  disastrous  working 
of,  in  case  of  street  railways,  91; 
municipalities  misuse,  93-94; 
abuse   of  the,  353 

Victoria,  Burdens  on  tax-payers  in, 
73 

Watering  stock.  National  Telephone 
Company,    34,    37,    104 

Watt,  James,  Treatment  of,  by 
Glasgow,    355 

Way-leaves,  Right  to  grant,  given 
to  Postmaster  General,  5 ;  right 
to  veto  such  grants  demanded  for 
local  authorities,  5;  power  to  veto 
granted,  6:  not  included  in  Gov- 
ernment licenses,  it,  18,  75; 
must  be  had  from  local  authori- 
ties,     II-I2;      Special     Committee 


386 


INDEX 


Way-leaves    (cotttintied) 

reported  that  companies  ought  to 
have,  37;  promised  by  the 
Government,  57,  86-87;  onerous 
terms  demanded  for,  57;  the  re- 
fusal of,  74-98;  short  notice 
contracts  for  private,  77-/8; 
value  of,  and  removal  of  royalty, 
to  National  Telephone  Company. 
78,  197;  lack  of,  causes  waste 
and  inefficiency,  78-80;  delayed 
introduction  of  so-called  metallic 
circuit,  80;  Bills  asking  for 
vetoed  by  Government,  41,  82-83; 
of  Postmaster  General  should  not 
be  vested  in  telephone  companies, 
93-94;  conditions  imposed  by 
cities  granting  underground,  95-97, 
184;  no  satisfactory  service  with- 
out, 121;  annual  payment  for, 
demanded  by  London  County 
Council,  126-28;  necessity  for,  in 
Glasgow,  144;  refusal  of,  in 
Glasgow,  unreasonable,  self-con- 
demned and  inconsistent,  157-64; 
Mr.  Hanbury  on,  182-83;  Justice 
Wright  and  Commissioner  Jame- 
son on,  184;  Sir  James  Joicey  on, 
251;  to  be  granted  to  competing 
plants,  255;  over  railway  property 
refused,  270-72;  summary  of  op- 
position   to    granting,    354 

Winterbotham,     W.,     on     conditions 
in    Glasgow,    143-44 


Wire,  Single  overhead,  chiefly  re- 
sponsible for  inefficient  service, 
151 

Wireless  telegraphy.  Patentees  of 
apparatus  for,  acquiesce  in  Justice 
Stephen's  decision,   1 1 

Wireless  telegraphy,  The  Post  Office 
monopoly  and,  337-47;  creates  a 
scare,  338;  A.  Chamberlain  on, 
338-39;  licenses  restricting,  340- 
41;  limitations  of,  for  protection 
of  Post  Office,  341-42,  351;  ac- 
ceptance   of    restrictions,    345 

Wireless  Telegraphy  Act,  1904, 
339-40;  gives  Postmaster  General 
full  power,  339;  renewed,  1906, 
340 

Wires,  Mileage  of,  in  place  on 
sufferance,    76-77,    196 

Wires,  overhead,  Continuation  of, 
recommended  by  Committee  of 
1885,    84;    cost   of   twin,    126 

Wires,  Underground,  to  be  laid  by 
Postmaster  General,  274-75;  mile- 
age of,  rented  to  Telephone 
Company,  279;  rental  paid,  280, 
309-10;  to  be  laid  for  provincial 
plant,   296 

Wolverhampton   area.   The,    53-54 

Woodhouse,  Sir  James,  questions 
Mr.    Goschen,    237 

Wright,  Justice,  Judgment  rendered 
by,  in  way-leave  case,  I34-3S>  357". 
implication  from  comments  of,  on 
Streets,   175,  184 


Government    Regulation    of 
Railway  Rates 

A  Study  of  the  Experience  of  the  United  States,  Germany, 
France,  Austria-Hungary,  Russia  and  Australia      ::      ::      :: 

By  Hugo  Richard  Meyer 

Assistant  Professor  of  Political  Economy  in  the  University  of  Chicago 
X+20I  pp.   8vo.   cl.   $1.50   net 


"His  presentation  is  plain,  his  illustrations  pertinent  and  his 
court  decisions  authentic.  The  concluding  chapter  is  an  excel- 
lent summary No  one  can  discuss  this  most  discussed  of 

all  economic  questions  without  making  himself  familiar  with 
Professor  Meyer's  book." — Interior. 

"A  timely  and  most  important  contribution  to  a  subject  of 
national  interest Intelligent  Americans  who  wish  to  in- 
form themselves  on  this  subject,  and  particularly  to  obtain  a 
knowledge  of  what  the  results  have  been  in  other  countries  of  the 
regulation  of  systems  of  transportation  by  government,  cannot  go 
to  a  better  source  for  this  purpose  than  that  which  Professor 
Meyer  has  furnished." — Boston  Herald. 

"It  is  difficult  to  decide  which  of  its  two  parts  is  of  greater 
value  to  the  man  who  would  form  a  correct  opinion  on  this  vastly 
important  question.  The  first  half  of  the  book  is  devoted  to 
showing  the  workings  of  government  regulation  in  foreign  coun- 
tries, both  in  jJiose  that  adopted  State  ownership,  as  Prussia  and 
Australia,  ana  those  in  which  government  interference  is  limited 
to  control  and  regulation  of  rates,  as  France.  The  second  half  is 
occupied  by  a  description  of  the  development  of  the  United  States 
by  railways  operating  under  comparative  freedom  from  such  legis- 
lative control,  and  in  showing  the  logical  effect  upon  our  trade 
and  industry  of  such  legislative  6\x&<i\\ovL.''  —Philadelphia  Eve- 
ning  Telegraph. 

"It  is  seldom  that  the  study  of  a  political  economist  of  a  cur- 
rent question  attracts  so  much  attention  among  observers  of  the 
legislative  programme,  now  forming  in  this  city,  as  Prof.  Hugo 
R.  Meyer's  book,  entitled  "Government  Regulation  of  Railway 
Rates,"  a  study  of  the  experience  of  the  United  States,  Germany 
France,  Austria-Hungary,  Russia  and  Australia.  Prof.  Meyer 
represents  the  extreme  advocates  of  letting  the  railroads  alone. 
The  book  is  interesting  from  the  vigor  and  fearlessness  with 
which  its  thesis  is  presented,  and  the  mass  of  information  that  its 
author  has  collected  from  all  parts  of  the  world,  exhibiting,  as  it 
does,  extraordinary  industry  and  scholarship." — Boston  Tran- 
script. 

THE  MACMILLAN  COMPANY 

64-66  Fifth  Avenue,  New  York 


Municipal  Ownership  in  Great 
Britain 

By  Hugo  Richard  Meyer 

Author  of 

** Government  Regulation  of    Railway  Rates** 


xii^-34-0  pp.   12mo,   cl.   $1.50   net 


"It  is  of  value  in  laying  emphasis  on  aspects  of  the  question 
which  the  advocates  of  municipal  ownership  are  prone  to  forget; 
and  it  should,  consequently,  make  for  more  careful  and  intelligent 
discussion  of  the  subject." — The  Outlook. 

"In  a  very  logical  and  interesting  fashion  Prof.  Meyer  pur- 
sues his  investigation  in  Birmingham,  Manchester,  Sheffield, 
Liverpool,  Bristol  and  Leeds.  His  judgment,  we  may  say,  is 
strongly  against  municipal  ownership  of  public  service  industries 
on  the  broad  theory  that  industrial  development  is  due  to  individ- 
ual initiative.  Industrial  progress  comes  not  from  the  people  at 
large,  whether  acting  as  individuals,  or  in  the  corporate  capacity 
of  city  or  state.  'It  comes  solely  from  a  comparatively  small 
body  of  men  of  unusual  imagination,  daring,  power  of  persuasion 
and  executive  ability.'  Such  men  see  possibilities  of  development 
and  new  ways  of  doing  things  where  the  average  man  sees  nought 
but  failure. 

"Prof.  Meyer's  book  is  a  very  important  addition  to  the  lit- 
erature of  municipal  ownership.  He  is  thorough  and  logical,  and 
the  large  volume  of  statistical  material  he  has  sifted  is  skilfully 
condensed.  Unquestionably  his  series  on  public  ownership  of 
public  service  industries  will  have  much  influence  with  students 
of  the  related  questions." — Boston  Advertiser . 

"Mr.  Meyer  makes  what  seems  to  us  a  crushing  statement  of 
how  the  proposal  to  enrich  the  public  by  giving  it  a  share  of 
private  profits  has  reacted  to  the  public's  detriment.  Of  disputa- 
tion there  is  no  end,  but  statements  of  fact  admit  of  no  contro- 
versy except  denial,  and  we  assume  that  nobody  will  dispute  Mr. 
Meyer's  facts,  however  his  ideas  may  be  opposed." — New  York 
Times. 

THE  MACMILLAN  COMPANY 

64-66  Fifth  Avenue,  New  York 


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